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Better Ways of Handling Credit Cards to Keep Your Personal Finance Healthy and Secure

By Charles Hopkins Published 09/19/2006 | Finance

Better Ways of Handling Credit Cards to Keep Your Personal Finance Healthy and Secure

No doubt, credit cards make our life easier. But sometimes it makes it too easy as it happened in case of my friend Nancy who borrowed money on her credit card to fulfill her dreams of an Alpine expedition. To date she has not been able to get rid of these consumer debts that she has made awhile back.

Well, for Nancy her credit card debt proved to be detrimental for the health of her personal finance. But the same loan worked to the benefit of another friend Bill, who borrowed the money for pumping in some fresh blood to his small business and it clicked and he could pay off the money within a short time.

So you can see yourself, there are two kinds of credit card debts: good debts generally taken for some kind of investments and consumer debts, which are described as bad credit card debts and generally discouraged to have. Because it is not easy to come out of the consumer debt. But once you have achieved in accomplishing this difficult goal, you will be the happiest person in the world. So here you get the first lesson of better credit card handling and that is: do not get tied up high-cost consumer debts.

The next trick is to keep a distance from the credit cards that charge you an annual fee. Just shop around and you will find many companies offering no-fee credit cards. You can even find out those cards that reward you for using them. Rewards are offered in different forms: you may be rewarded by rebates on certain purchases; you may get a cash-back after making purchase of certain value and so on.

However, if you are confident that you will be able to pay up the credit card dues within the grace period, then only consider these no-annual-fee cards, for they come with a fairly high interest rate. If you plan to carry on your credit card debts to the following months, you should go for those credit cards that offer a low interest rate.

Another credit card mistake most people tend to do is make unnecessary credit card purchases to add on to the reward points. There is no point in making unnecessary purchases so that you get a small reward in the end of the year. It tempts you to actually purchase the things you cannot otherwise afford. It may prove to be detrimental to your long-term financial health.

An intelligent way of better handling of credit cards is to get the credit cards with a lower credit limit. Sometimes, the issuing company raises your credit limit as a means of reward; do not accept it. Just inform your credit card company to reduce the credit level to the point you think suitable for not inducing you into unnecessary purchases.

It is a good idea to replace your credit card with a charge card that requires you to pay the full balance at the end of each billing period. That way you are not tempted to carry over the debt to the next month and fall into a debt cycle. It will prevent you from overspending when you know at the end of the month you have to clear the whole bill.

So you can see there are several ways of better credit card handling. But as you know, prevention is better than cure. So limit the consumption purchases on credit cards, borrow money for investment purposes only. This way you will be able to keep your personal finance sparkling clean.