Wait, you mean you never had a credit card education class in school? Okay, me neither. The quality of education these days!
But there’s no reason that high schools or colleges shouldn’t offer a class like this. After all, credit card education isn’t an awkward topic like the other type of ed we had in our adolescent years, so there’s no reason to be bashful on talking about the practice of safe credit card use.
Why you should practice safe credit card use:
Credit cards are a tool that can make your financial life (and by extension, your non-financial life) better or worse, depending on your actions.
If you practice responsible and safe credit card use, you increase your chances of having a healthy and productive relationship with your credit cards, credit report, personal budget, and all instances in which you will have to apply for loans (mortgage, car loan, private education loans, etc.). If you don’t practice safe credit card use, well, then you will catch a nasty case of CTD – credit transmitted disease. Symptoms might include feelings of fatigue (I’m so tired of all these bills), anger (why is the company charging me a 29% APR?!), and in the worst case, bankruptcy, which can do a real number on your credit profile.
How to practice safe and responsible credit card use:
1. Recognize that credit cards are a method of payment (much like cash, checks, electronic transfers, etc.), not a source of funds for payment. You can read more about this philosophy of credit use at my BlogHer post.
2. Pay off your balance in full every month (the safest way!), or at least always be sure to pay the minimum payment. This will help you avoid the hefty late fees and finance charges. However, if you are a good customer and you run into these charges, many credit card companies will waive them for you.
3. Keep track of your spending – it doesn’t have to be down to the dollars and cents, but have an approximate guideline of how much you can put on your credit card. This will also help you from coming too close to your credit limit.
4. Keep your friends close, and your credit cards closer. Make sure you always know exactly where your credit cards are. This way, if a card is lost or stolen, you will notice and can report the fraud quickly.
5. Use virtual account numbers when you shop online, especially at a site that you’re unfamiliar with. Some cards offer virtual account numbers – which are numbers generated specifically for a short period of time (say, a few days). This way, the online merchant does not have access to your real credit card number if a hacker breaks in the system or if there are other security breaches. This feature helps protect you in the Wild Wild West of online credit use.
6. Limit your number of credit cards. Most experts recommend 2-4 credit cards. More credit cards means more cards, more credit limits, more due dates, to keep track of.
7. Don’t share your credit with just anyone. Remember, you worked hard to build and maintain a good credit history. Think long and hard before you become joint account holders / cosigners with someone else. If you become a joint account holder / cosigner, you might become 100% liable for the debt that is accumulated on that account if your partner turns out to be less than sterling credit user. Please do your own research, understand the consequences, and honestly evaluate if that person would be a good credit partner.
8. Last, but not least, enjoy your credit cards! Responsible credit card use can be a beautiful thing. I use my credit card rewards points to get Sephora gift cards. Perhaps you are an avid traveler and can get air miles on your card? Or you own a small business and receive cash back on your business account? The possibilities are out there – safe credit use help you avoid credit-related diseases and enjoy a happy, healthy relationship with your credit cards.