As credit card delinquency rates continue to fall from the 26% level last year, it is inevitable that credit card companies will soon put their marketing skills into overdrive. New credit card offers are beginning to flow in from various companies to customers who have maintained a good credit record post-recession. In fact, the 0% card offer is also making a comeback now.
None of these signs mean that you can afford to relax your firm control over spending using this piece of plastic. In this climate of over enthusiastic advertising and tall claims from credit card companies, it is important to be doubly careful of how you are managing your credit card.
Keeping Your Payments on Schedule
What you do with your other payments does affect your credit card in many cases. Your card company may hike the rate charged on your balance if you miss a payment on another loan. Making all your payments on schedule not only helps keep such unpleasant shocks at bay, it also helps you maintain a strong credit score.
Beware of Rewards
Reward points on your credit card can be tempting and this is why the company offers them. Remember that your reward points come at a price. You are using your credit card to earn these points. Every time you use it, you need to pay back the dues with interest. Assess how quickly you can repay your balance and how much cost you will incur if you have to pay interest on overdue payments. Is this cost worth the reward points? If yes, then go ahead and use the plastic. If no, then firmly resist all temptation to use the card just for reward points.
Understand Deferred Interest Plans
When you opt to buy big ticket items like furniture with your credit card, your card company may offer a deferred interest plan. Under the terms of this plan, you don’t pay interest for the purchase amount for a specific period. This may seem like a wonderful idea at the time but in case you fail to raise the money needed for repayment at the end of the deferred period, things get nasty. Your card company can now charge you full interest for the period, including the months during which interest was waived off. The result will be that you’ll end up with a huge bill and would regret your purchase.