Proper Usage Of Credit Cards Explained

It's no secret that credit cards have been putting borrowers everywhere into a debt they can hardly get a hold of. But credit isn't something that should be neglected, since it is responsible for making the financial industry tick. The solution is, as a result, to learn how to use credit and credit cards to the benefit of the consumer.

Credit card companies like to make the idea of free money as obvious as possible. After all, if a consumer goes on a shopping spree with "free money," they are more likely to find themselves in a debt to the credit company in question. Thus, the first lesson is to steer clear of thinking of credit cards as free money, and instead as an emergency money source in the event that consumers are in a tight situation.

As a next lesson for those new to credit, interest rates and other fees will only come to buyers if they can't pay off their purchases within a month. So long as they stay up to date on their purchases and bring their owed debts to zero each month, the common credit company won't charge a thing to borrowers. The trick in this situation is to maintain a proper budget, and stay as up to date on it as possible so as to ensure debts aren't created.

To better reel in new customers and profits, credit card companies like to offer incentives for using the credit cards they offer. Incentives usually aren't very large- with some credit companies offering cash back bonuses or grand prizes for select users. In offering incentives, credit companies hope consumers get purchase happy and buy more than they can pay for, whereas credit companies would benefit from new interest rates to be paid.

Low interest rate credit cards are also another type of marketing genius that credit companies make use of. Lower interest rate credit cards typically don't last long, although consumers will usually forget that the interest rates will rise after a set amount of time. And when they do, consumers will generally find that they are paying much more money back in interest than they would otherwise. It isn't the best business practice, but a wise consumer will know how to avoid getting caught in this marketing trap.

In Conclusion

Creditors know how to pull the right strings with borrowers, as has been made apparent with their many marketing ploys. But to stay out of debt and free of any troubles, it is recommended that consumers pay with cash or check where possible. As previously stated, credit cards are best used for emergency situations only. Using them for much else may put borrowers into a debt that they can hardly climb out of- and where consumers can avoid debt, they should do so at all costs.