The Right Credit Card Mentality

Credits cards can hurt or help your financial situation, depending on how you use them. You must have the right credit card mentality to not end up on the losing side with your credit card company.

Credits cards should not be used when you do not have sufficient funds to pay off the full balance at the end of the month. Otherwise, you will be hit with huge interest fees, which you would never agree to if you were purchasing a home, car, or other large-ticket item through a financing arrangement.

The key with interest is to have it working in your favor, not against you. You should be earning interest, not paying it. This requires avoiding debt, which should be done with the only exceptions being for a new home or maybe a car. Interest never sleeps or takes vacation like you do.

Then why have a credit card? Credit card companies are constantly giving incentives to sign up with them. These can at times be very useful in gaining bonus airline miles or other types of reward points that will give you discounts on almost anything you could be shopping for. But please be careful if you are signing up for a new credit card simply for the sign-on bonus. Your credit score and rating can be affected by the number of open credit lines you have at any given time. The more credit cards you have, the more open credit lines are open in your name. This has the potential to hurt your credit when lenders realize that you have more existing lines of credit than you could afford if they were all being used. That said, it doesn't hurt to take advantage of great offers and then not even use that card or even cancel the card altogether (check the agreement upon signing up in case there is a time requirement to keep the sign-on incentive).

The bottom line is to pay off your credit card and use it as a convenient way to pay for your shopping needs. Earn the rewards and don't pay any interest. I don't even carry any cash anymore since I can use my credit card to pay for almost anything. I have also never paid a cent of interest.

Happy shopping during this Christmas season!