Why Do People Use Credit Instead of Cash?

If you have a credit card, are you using it wisely? Unfortunately, many people use their credit cards in ways that really hurt their budget. Not only do they have to pay more than they need to each month, but they have no way to know if they are spending too much or not. So, here are some tips to save money and use credit sensibly:

Do you have a lot of outstanding credit card debt? People with credit problems often feel like they don’t matter because they can’t get out of debt. The reality is that people with serious debt issues are hurting their credit scores and financial futures. That doesn’t mean that they deserve to be treated badly. But, if you are in debt, try to consolidate your outstanding debt before you apply for more credit. By consolidating your outstanding debt, you can save money and pay it down faster.

Have a tight household budget. One of the reasons that people are so inclined to use credit is that they think they need to borrow money if they don’t have it. The problem with this thinking is that it can lead to borrowing more money to buy things that you don’t actually need. Keep track of how much money you actually have coming in each month. Then, once you have a good idea about your credit situation, apply for a credit card that offers a lower APR (Annual Percentage Rate). This will save you money by reducing your interest rate and possibly even lowering your monthly payments.

Are you a frugal living enthusiast? If you’re trying to save money and live frugally, you need some great tips to save money and use credit wisely. Here are some tips to help you learn frugal living:

Keep Your Maximum’s Low. It’s usually tempting to buy things that are out of your price range. If you want something that costs under $100, you might go ahead. But if you have several credit cards, you might be tempted to pay off one and then buy the other one at full price. But remember that you can’t use any of your credit cards on those purchases, even if the sales person says it’s a great deal. Instead, pay it off immediately.

Set a credit limit. When you first get your credit card, or even when you open a new account, set a credit limit that’s right for your lifestyle. If you tend to go out a lot, pay your bills on time, and don’t owe a lot of money, you probably don’t need to pay extra for a higher credit limit. If, however, you’ve had trouble paying your bills, or if you live paycheck to paycheck, you’ll want to look at your credit limits as a way to determine what your true financial needs are.

Examine your transactions. The sales person at the store might have told you that you can use up to fifty percent more of your available credit than you have on your checking account. Check your monthly bank statements and credit card statements to see if you’re actually using up this credit allowance. If so, call your credit card company and ask to see your current account limits.

Use your credit wisely. Why do people use credit instead of cash? It’s because credit cards give you the freedom to buy things that you otherwise couldn’t afford, and to pay for them with a little extra money at the end of the month. They can also be used to build up your savings, which will make paying for your daily expenses easier down the road. When you use your credit wisely, you’ll eventually realize that cash is just a short term stop gap, until your next payday.