Credit and debit cards are handy pieces of plastic. Sure, they offer a great way of scraping off the ice on your car window. But more than that, above all, they offer the convenience of cashless shopping. Since the invention of credit cards a few decades back, many people have been lured to the promise of purchasing without the need to carry cash. Credit cards offer convenience and safety. However, along with the convenience brought about by credit cards are the many financial burdens that credit card mismanagement brings.

Maintaining a good credit score

Having a credit card is about more than just the convenience it offers. People own credit cards for a variety of reasons. Many people who are getting ready for a mortgage build good credit scores around their credit cards. People who are looking to take out a bank loan can also apply for credit cards to build credit history. For these types of people, the question is not just how they use their cards – most importantly, it’s about how they take care of it by paying their dues on time.

Indeed, getting a credit card is great way to build your credit history and rating. Your credit card rating will show your creditors your levels of credibility and accountability, giving them some good information with which to base their decision on in granting you a loan.

Paying only the minimum – why it’s not a good idea

Unfortunately, many credit card owners get the wrong idea when it comes to paying only the minimum charges on their cards. Ideally, minimum monthly payments offer credit card holders some convenience by giving them an option to pay only a predefined percentage of the monthly bill. However, paying only the minimum amount is a risky deal as it will make you pay off your dues longer. Also, because of minimum monthly payments, you will end up paying for compounded interest which could total your debt to an amount that you will have to pay endlessly.

Also, the problem with minimum payment is that banks may decide to raise the monthly minimum payment dues. If your cash flow only allows you to pay the current 2% monthly minimum payment, you may still get by easily. But if banks decide to double the minimum payment, you could end up in a very awful financial situation.

How not to end up in a messy credit card debt

A good rule of thumb when getting a credit card is to always remember that credit cards are not free money. The whole idea of getting a credit card is that if you are earning around $2,500 a month, and you have a $2,000 credit limit on your card, you can spend the entire limit as you wish and pay off $1,000 from your monthly earnings. That will still leave you with $500 cash.

Financial experts would advise that, to avoid the financial trap called debt, it is wise to pay off more than what you’re legally required to for the amount you’ve taken out of your credit card. Don’t just pay the monthly minimum payment, so you won’t end up paying longer for your credit card debt than you should.

Another good rule of thumb – don’t swipe that card unless you REALLY need to.