Well for those of you who have read my first post of a three part post on when you should not use credit cards, here’s the second part waiting for you to read. Remember, it’s only if you know how and when to use credit cards that you don’t fall prey to credit card debt and mounting bills you find difficult to pay.
1.While building up your credit score
If you are trying to increase your credit score by paying off some of your pending credit card debt, do remember that any additional purchases you make only leads to your increasing your existing debt.
This in turns only ends up creating an opposite effect on the score and doesn’t serve your purpose at all. The only way you can build your credit score is by showing proper finance and credit card management.
If the credit score companies realize that you are still buying things when you should actually be working at improving your credit score, it only shows that you don’t and can’t have any control on your spending habits. So don’t use your credit card to buy anything while you are working at rebuilding your credit history. If you do, you only end up doing more harm than good.
2.To pay off student loans
If you can’t afford to pay for your student loan on your own, you have other options to choose and use besides your credit card. The interest rates for credit cards are much higher than a student loan’s interest rate which defeats the purpose of your using your card in the first place.
You can opt for income-based repayment plans and deferment. They are a much better option than using your card as paying debts with a credit card only increases the amount of interest you will be paying for your debt. This in turn puts you into more debt.
Even if you opt for a zero-percent introductory credit card offer, remember that this offer is only for a short time like a few months and not through the tenure of the loan. Moreover, while the federal government will accept credit card payments for default loans, most student loan services don’t.
3.To buy things at the flea market
It’s true that many vendors at the flea market accept credit cards these days. But it’s always better to stick to the old fashioned way of buying things here by paying by cash. While you may find it convenient to pay the guy selling rickety stuff by credit card, this is a purchase where convenience doesn’t outweigh the risks involved.
4.If you have a habit of paying off one card with another
Some people have a habit of swapping their debt every six months. This is not that healthy a habit as your swapping cards every so often shows on the credit report. It shows how volatile you are with your finances. Besides, your credit report shows you applying for multiple credit cards all so often within a year. This is not good for anyone’s credit score.
Moreover, if you are doing it for the first time too you need to consider if the offer is too good to be true. This is because the transfer fees for such transactions always increase by at least one percent every year.
So this ends up with your having to pay off as much as 4% of your debt just to transfer this debt. Moreover, if you swap cards and start using it, do check on the rates you will end up having to pay once the promotional rate ends. There always is a chance that it could be much higher than the rate you had originally tried to escape from.
5.As shopping therapy
If you are one of those types who think that a new purchase will cheer you up when you are not in a good mood, then it’s time you started thinking again. Of course, it’s okay if you use cash to make your payments. This we you will have control, and know how much of money you are spending.
However if you use your credit card to pay for your shopping spree, then the next thing you know is your credit card balance that just seems to spiral out of control!
6. If you don’t have plans of paying off the balance
It is always better for you if you pay off all your purchases in less than three months’ time from the date of purchase. If you are not confident of doing so, you end up taking a risk by making purchases with your card. In most cases, this only leads to financial trouble and debt for you.
Wait that’s not all…there are still some more instances where using your credit card can only lead you to debt. I’ll be sharing my third and final post where you will be able to read and find out how you can avoid credit card debt by using it wisely and correctly.