As the economy gets tight as it is today so do the banks. We hear news reports that the credit crunch has now hit the banks and the banks are no longer willing to extend the generous credit limits of the past.
No matter how long you have maintained a pristine payment record, your APR may rise overnight due to late or skipped payment. To make the minimum payment on another, plenty of people find themselves taking a cash advance on one credit card. Cash advance means a transaction fee; while making the minimum payment on the other barely keeps you afloat until the next payment are due. You will be in a downward spiral which ends unhappily, if you do this type of activity. Your rates go up, your credit rating goes down and you’ve got a mess on your hands.
You needs for credit advice is becoming apparent as this is not a pretty picture. As you know you can’t continue this way, but what can you do?
If you were to sit down with your kids and try to give them your best credit advice, what would you say? You’ve been there, done that, and the credit advice you give them will be the voice of experience. Learn to follow your own advice. Here are the cardinal rules of credit.
1. If you can’t afford to pay cash for an item, don’t buy it. If you reserve the use of credit cards to purchases such as gasoline, clothing and regular expenditures for which you already have cash in hand, you can maintain a credit history and good credit rating by setting that cash aside and paying off those credit cards each month.
2. Emergency expenditures do crop up. You may need a root canal for which your insurance only pays a limited amount. A credit card may be used responsibly for such purposes. Our credit advice in this situation? Adjust your monthly budget and pay it off in the shortest period of time. It may be tempting to make that minimum payment, but it may take a year to pay it off. The interest alone may turn that root canal into a $1000 deal.
3. Almost everyone ignores this prudent bit of credit advice: Do not finance holiday shopping on a credit card! Sure, you want your family to enjoy the great gifts you can put on a credit card. However, you don’t want them to suffer six months down the road when you’re unable to pay for essentials.
4. No matter how tight your budget is, almost everyone can afford to put aside $10 a week in a savings account. Not much, but in a year’s time, you can pay cash for that root canal!
In a nutshell, our best credit advice is not to live beyond your means. No matter how modest but establishes a saving plan. You never know what life may throw your way.
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