Credit cards are often given a bad rap. If you look at financial articles about them, many recommend against using credit cards at all. They discuss the debt that you'll 'inevitably' create by using the cards, saying that you'd be better off paying for everything in cash so you won't lose control of your financial situation from the accumulation of credit card debt. Well, those notions may be true, but they're only part of the whole story.

You must come to the realization that credit cards are not the enemy. In a way it's akin to the old 'guns don’t kill people, people kill people' cliché. Credit cards can indeed be dangerous weapons if they're not used wisely. On the other hand, they can be both a financial help and a great reward system.

Generally speaking, credit cards are a virtual necessity in today's world. For instance, when was the last time you tried to rent a car or hotel room? One of the first things the clerk asks you for is – that's right – a credit card. Even if you're paying cash for the room or car, they'll still require you to provide a credit card to guarantee the base charges and any incidentals. This is typically a non-negotiable term. Without a credit card you'll likely be turned away.

Whether you're applying for your first credit card or trying to clean up a history of bad credit, here are a few basic tips to follow:

  • Budget. Getting a new credit card should not be viewed as a green light to go on a wild shopping spree. Just as if you were buying with cash, make intelligent decisions when using credit cards and only make purchases for which you have a realistic plan to pay off. Your card charges should fit within your budget in the same manner as your cash purchases.
  • Pay on time. This is one of the most important things when that you can do to protect your credit. Make sure your payments are received by the creditor at time they're due (a few days before is even better). Furthermore, if you're able to pay the full balance off every month, you'll likely be within the card's grace period and you won't be charged any interest. If you're late with a payment, you'll have to pay a late fee (which can easily be $30 or more). You may also be punished with an increase in your interest rate, and that could haunt you for years to come.
  • Watch the interest. Be aware of all applicable interest rates before you select a credit card. While many cards have a 0% introductory rate, it will not last forever (that's why it's called 'introductory'). When the introductory period ends, what will the new interest rate be? It could be quite high, pushing your payments up drastically.
  • Look for 'Rewards.' There are many credit cards available that will give you something back for your usage. Numerous cards offer valuables such as cash back, airline miles or other perks. However, be sure to take into account any additional fees that they may charge, such as higher annual fees. If you're considering this type of card, make sure that you'll earn more in 'rewards' than it will cost you in fees.
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