When the economy gets as tight as it is today, so do banks. We hear news reports that the credit crunch has now hit the banks. Banks are no longer keen to extend the philanthropic credit limits of the past.
Your APR may rise overnight due a late or skipped payment, no matter how long you've maintained a pristine payment record. Plenty of folks find themselves taking a cash advance on one credit card, to make the minimum payment on another. Cash advances mean a transaction fee, while making the minimum payment on the other barely keeps you afloat until the next payments are due. This type of activity can put you in a downward spiral which ends unhappily. Your credit rating goes down, your rates go up and you've got a mess on your hands.
While this isn't a pretty picture, your need for credit advice is becoming apparent. You know you can't continue this way, but what can you do?
If you were to sit down with your kids and try to give them your most excellent credit advice, what would you say? You've been there, done that, and the credit advice you give them will be the voice of experience. Learn to follow your own advice. Here are the cardinal rules of credit.
1.If you can't afford to pay cash for an item, don't buy it. If you reserve the use of credit cards to purchases such as gasoline, clothing and regular expenditures for which you already have cash in hand, you can maintain a credit chronicles and good credit rating by setting that cash aside and paying off those credit cards each month.
2.Emergency expenditures do crop up. You may need a root canal for which your insurance only pays a limited amount. A credit card may be used wisely for such purposes. Our credit advice in this situation? Adjust your monthly budget and pay it off in the shortest period of time. It may be teasing to make that minimum payment, but it may take a year to pay it off. The interest alone may turn that root canal into a $1000 deal.
3.Almost everyone ignores this prudent bit of credit advice: Do not finance holiday shopping on a credit card! Sure, you require your family to enjoy the great gifts you can put on a credit card. However, you don't want them to suffer six months down the road when you're unable to pay for essentials.
4.No matter how tight your budget is, almost everyone can afford to put aside $10 a week in a savings account. Not much, but in a year's time, you can pay cash for that root canal!
In a nutshell, our greatest credit advice isn't to live beyond your means. Establish a savings plan, no matter how lowly. You never know what life may throw your way.
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