Money might make the world go around, but credit cards are the vehicle by which most money travels. Most adults have credit cards these days and they probably have more than one. In fact, lots of teenagers have credit cards too. However, too often, people don’t follow sensible patterns of behavior when it comes to credit card use. Therefore, they often get into financial trouble without actually realizing how they got there.
What people should be doing with their credit cards and what they actually do are usually two very different things. In fact, the manner in which people should use their credit cards depends upon their age and their particular circumstances in life. Additionally, using credit cards to their proper advantage is not something people are born knowing how to do.
Following the example of others is possible, but how closely does anyone monitor someone else’s use of their finances? Perhaps a bit of applied training is a good idea or at the very least, a simple application of some tried and true rules for proper credit card use. A few ideas on what you should use your credit cards for are presented below.
The Under 21 Crowd
Too many people look at and use credit cards as though they were additional income. When, in fact, credit cards are merely a financial convenience that should be used on occasion rather than abused in the way that many people handle their credit cards nowadays. Teenagers and college students who have credit cards should be using them strictly for necessities or items they will have the money to pay for once the bill comes in.
Perhaps the time to teach our children to use credit cards responsibly is when they are young, their needs are few, their desires are many, and their income is limited. A teenager can be given a credit card with the understanding that the bills will be his responsibility. If parents are consistent with their expectations, then students can learn to handle their money responsibly.
Students can learn not to place too much on a credit card because they understand that when the bill comes due, it is going to be their responsibility. In this way, students can learn to control some of their impulse spending once they realize that the bills only get larger if they can’t afford to pay off the balance in full.
Parents can assist their children with the learning process by monitoring their progress and spending habits. However, any suggestions parents have should be presented as optional if they want the student to learn to handle money on their own. Nonjudgmental guidance is beneficial and will lead to future discussion, whereas negative comments will only send the student running the other way. Another strategy to safeguard your student from too much debt is to insist on a credit card with a low limit.
Young Adults in their Twenties and Thirties
An adult in his early twenties should use credit cards to establish good credit scores. A good credit history will advance the possibility of achieving good mortgage rates once the time comes around that he decides to purchase his first home. It’s important to shop around for credit cards no matter how old you are.
Interest rates, annual fees, and late payment charges vary from card to card, so acquiring one with the lowest fees is beneficial in more ways than one. Obviously, it allows the individual to save money. Plus, it also allows more cash to stay fluid for spending since excessive fees aren’t eating it up. Another good strategy for young adults is to maintain reasonable spending habits that are easily paid off within a matter of a month or two. This allows the individual to build up a good credit history without amassing too much debt.
Additionally, adults in their twenties and thirties should avoid making large purchases that will take them months to pay back on credit cards that carry high interest rates. Even if they wait until they can afford to pay about half the cost of a high price tag item in cash and then charge the balance, they will be able to realize quite a savings. Another positive strategy for this age bracket is to look for a credit card that offers perks that fit their lifestyle.
Middle aged adults
By the time adults have reached their forties and fifties, they should have amassed quite a bit into their retirement accounts. Unfortunately, this isn’t always the case. Even if it is, it doesn’t hurt to put away a little extra for retirement. If large credit card debt is part of your world, it’s time to start consolidating your debts, paying off your cards, and eliminating a few of your personal credit cards. The money you save from lower bills can be placed into a retirement account that will come in handy in a few years.
Senior citizens are often faced with the dilemma of how to pay for rising medical costs including care and prescriptions. Too often, they turn to credit cards to pay these bills. Unfortunately, if that is the case, it’s a cycle that continues to spiral. A reverse mortgage or a part-time job could be a better solution than credit card use.