How-To Guide: Smart Uses Of Credit Cards

by : Michael Huch

Most of the Americans now have credit cards. But how to use in a smart way and prevent financial disaster? Very often we hear talking, how bad credit companies are. But in fact, banks are not bad, they are even good in giving you the opportunity of having an instant credit and paying it off later. It's usually credit card holders behave irresponsibly that leads to financial problems.

First rule to follow: protect your credit score. When you use your credit card to make purchases, you have a certain amount of time (usually one month) to pay that card off or you will be charged interest. If you are late making the payment you're then charged late fees. Also, any late payment lowers your credit score.

Another term that you need to be familiar with when dealing with credit cards is grace period. A grace period is the time that you have to pay off your monthly statement before you will got charged for interest. There are three types of grace periods commonly associated with credit cards. They are: a typical grace period, a full grace period, and no grace period.

With a typical grace period, you pay interest on all new purchases unless you have paid off your previously monthly balance. A full grace period means that you never pay interest on new purchases regardless of weather you paid off your balance the previous month. No grace period means that you pay interest on new purchases weather or not you have paid off your previous months bill. The way you can figure out this information is to call your bank and ask. If you don't have a credit card yet, it's always better to apply for one with a full grace period.

If you like to shop online, it’s really easy with credit card. When you use it online you do not have to worry about people stealing your credit card information anymore. Many credit card companies give you a different card number for online purchases so that your real credit card information is not on the Internet.

Another good way you can use your credit card is to help you protect your large purchases. Let's say you go to the store and buy a flat screen TV. Some credit cards have 'extended warranty' option. It means that if your flat screen has 1 year of warranty, (if you purchased it with your credit card) visa or mastercard could add another year of warranty to your purchase. If your flat panel breaks one month after your manufacture warranty expired, you can pay the repair with the same credit card and apply for deduction at "claims department" of your bank. But before doing that, check with your credit card company, if your card has this option (its usually default with high range cards like: gold or platinum).

When used the right way a credit card can be a good thing to have. But you have to be responsible and use caution.