How to Modify Credit Card use to Avoid Financial Ruin

Credit cards can be dangerous weapons in the wrong hands and have been the precursor of financial ruin in many instances. There is a simple fact about credit cards which is this: credit cards allow you to spend money you don’t actually have. If you fail to repay those funds before the monthly due date you will incur interest on the balance which ultimately means you have just paid far more for your purchase than the cash price. The simple rule of prudent credit card use which keeps you out of financial problems is that if you can’t afford to buy the item in cash then do not put it on your credit card. Simply save up and wait until you can afford to buy it.

Credit cards have turned the nation into spendthrifts who have thrown financial judgment out of the window. The buy now pay later mentality has become common place and the economic problems this has brought was inevitable. Card issuers are guilty of irresponsible lending and many consumers believe they have a right to purchase on credit. When one speaks of modifying credit card use to prevent financial problems it would be more apt to address the issue of modifying peoples attitude to credit and understanding that things which come easily often come at a cost.

If you cannot control your spending on credit cards then it is best not to use them at all. Alternatively you could learn how to use credit cards to your own advantage rather than to that of the bank. Credit cards in themselves don’t lead to financial ruin; it is the way in which people use them as a product which is the problem. Interestingly the UK is considering introducing financial literacy testing before people will be given loans as the problem is universal where credit is used.

In the right hands credit cards have many advantages. They can be used to obtain an interest free grace period on purchases and provide built in insurance against theft and accidental damage of purchases for 90 days. They provide built in cover so that the card issuer can address the issue of faulty goods on your behalf with the retailer and provide a guarantee if a vacation company you use goes bust. They can provide cash backs and reward points. However over half of all credit card users simply use them to supplement additional spending and have no awareness of their benefits being wiped out by overdue payments.

To modify your credit card use, if you continually carry a balance which incurs interest, then simply stop using them and concentrate on paying off your credit card debt as aggressively as possible. Only use credit cards if you are certain you will be able to pay the monthly balance off in full, as paying interest is frankly a mugs game. Never sign up for a credit card without reading and fully understanding the terms and conditions. No one conned you when a penalty interest rate was introduced when you paid late as it was laid out in the terms and conditions, and new guidelines are in place to prevent the banks sneaking in new charges.

Switching to cash or debit cards is a good move for those who cannot handle credit cards wisely but a card should be retained and used occasionally to build your credit score. Don’t fall for the latest con of prepaid cards are they are simply an excuse to charge you to use your own money when cash or debit cards suffice just as well.

Unfortunately FICO scoring is a business which keeps people trapped into using credit to retain a high credit score necessary in so many areas of life. Unless you can work your credit cards to your advantage you should modify your use of them to only use them to retain a good credit score by maintaining one card to use sparingly each month when you are sure of being able to pay off the full balance. Modifying your use of credit cards in this way will prevent the road to financial ruin which so many have fallen into by failing to understand the full nature of the inviting piece of plastic.