Will That Be Credit?

“You want 21 percent risk free? Pay off your credit cards.” -Andrew Tobias

To all of the millions of people that use and live by credit cards, it is abundantly clear that we are prey to our own human nature. Credit card companies understand this and exploit the tendancies of human weakness to "want" things even when we do not really "need" things.

Once you are approved for a credit card, which is quite easy to accomplish, the credit card companies are pretty convinced that you will use that card. The credit card companies are even more sure that you will not pay off your credit card each month. This is where they hook you and it is where they make their money...interest charges.

It is those interest charges that begin to create the circle of debt that can make it nearly impossible to ever pay off a credit card. It is this constant debt we carry, you, me and everyone else which is the basis upon which credit companies create their revenue.

Now comes the rub, late fees. Most late fees average $34; instant profit to the credit card company and an addition to your balance that will collect interest charges if you don't include that amount in your next payment.

How do you to overcome the pitfalls of credit card usage? An article by Kristyn Kusek Lewis in Readers Digest offers these following tips.

* Remember that the due date on your card statement is just that. A postmark date is not the same thing. Because many card issuers impose ultra-specific cutoff times (American Express, for example, won't process some payments received after 12 noon in a customer's time zone until the following day), try to make your payment, by mail or online well in advance.

* One way to avoid going over your limit (and facing extra fees as a result): Go to the card company's website. Most will alert you via e-mail when you creep close to your cap.

* If you've historically been a good customer, it can't hurt to ask the customer service department to waive over-limit or other fees.

* Similarly, if your interest rate goes up, it's worth asking to have it lowered. A Study by the Massachusetts Public Interest Research Group found that when cardholders requested a reduction, almost six in ten got their rate reduced by at least a third with just one five-minute call.

What I caution everyone is to simply use credit cards with care. Do not overuse them and keep them to a minimum balance. Cash is always better but use of credit can be useful. One good way to limit the need for credit card purchases is to pay yourself at each paycheck (10%) and build up your savings. This will cut down on your need to use a credit card.

Lastly, read as much as you can about using credit and creating a savings account. Knowledge is power in many instances and the more you know, the better prepared you will be to handle your finances.