Use of credit

Credit card companies bank on the notion that average American consumers don't always do their credit card math. After all, who in their right mind would pay 18% interest on every purchase? Millions of us, it seems, every day.

So, maybe it's time to start doing the math. Before paying for an item or a service with credit, dust off your multiplication tables and ask yourself honestly: Can this purchase wait until I save up to pay the entire price? Is it worth it to me to pay more - often a lot more - rather than saving up? Do I have more pressing bills? Is there a better time to make the purchase?

If you think of credit as a short-term loan to be paid off within a few months, you'll start making better use of your cards right away. Furthermore, if you can only afford to pay the monthly minimum for a prolonged length of time, you might want to consider putting yourself on a strict budget until the balance dwindles to zero. Own your cards, instead of letting them own you!

You might also consider self-imposing a limit on the number of cards you carry. Too many cards with too generous credit limits can be a red flag to creditors. A spending spree with many or all of them could push a consumer into debt consolidation, significant delinquencies or bankruptcy. Besides, the fewer number of cards you have, the easier it is to keep track of your debts.

Smart use of credit also involves a good deal of research in order to find the card with best rates for you. Credit card companies have done such a good job of marketing to consumers that many of us feel we've lost control of the credit process. We think we must either accept or reject the offers that hit our mailbox, rather than actively searching for the best deal.

But you do have a choice. Even if you're not in a position to be picky, you probably have lots of options available to you. The credit card business is very competitive, which is always good for the consumer. Start by knowing what is important to you in a credit card - low or no annual fees, low interest rates, airline miles, etc.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.