NEW YORK (MainStreet) — Credit might be necessary, but it doesn’t have to be a necessary evil. In fact, if you use credit appropriately and intelligently, it can be an outstanding tool. For people who aren’t carrying a balance, credit can be a tool to a better life. But you've got to use your credit cards the right way. So how do you do that? Here are some regular habits for you to get into to ensure that your credit cards add to your life rather than taking away from it.
Save the Receipt
Mike Sullivan, the director of education with Take Charge America, keeps the receipts for everything he buys with a credit card.
"There are lots of scams where people are putting in false charges," he says. "A lot of times these charges are very small." So keep your receipts and compare them to your statement every month. If there’s any discrepancy, follow up immediately.
Don’t Mistake Your Credit Card for Income
Randy Padawer, a consumer advocate and credit expert with LexingtonLaw, points out that "many people think that shiny new credit card is an extra $15,000 in income." Of course, it's the opposite that’s true.
"A credit card isn’t wealth -- it's debt," he says. "And some of the most expensive debt you can get."
Because credit card debt can be so expensive, Padawer urges people to shop around for the best deal before putting any plastic in their wallet. "Your credit score will determine how broad your options are," he says. What’s more, if you have sub-prime credit, you need to either pay off your balance every month or not use much credit at all.
Pay Your Balance Down Every Month
On that note, Padawer states the importance of paying down on your balance every month.
"You should pay down as much as you possibly can every month," he says. It's not just that you’re borrowing money at some of the worst rates possible. It's also that how much credit you’re using impacts your credit score -- which in turn impacts how much credit costs.
Use Multiple Cards for Different Types of Purchases
Sullivan has multiple cards for different reasons.
"I never use the same kind of card online as I do in person," he says. This makes it easier to pin down when there's a problem.
"It gives me a little protection in the event of one of these data breaches we hear about all the time," he says. "It helps me know what card I can keep using and not be without credit."
Never Take a Cash Advance
Credit in general is expensive. However, Sullivan notes that one of the most expensive uses of credit is a cash advance. "This is an extremely expensive way to borrow money," he says. If you’re in need of a lot of cash, you’re far better off going with a personal line of credit or a bank loan to help get you back in the black.
Photocopy Both Sides of Your Credit Card
No one likes to think about having a card get stolen. But you can make your life a lot easier if you photocopy both sides of your credit card just in case. "You want to call immediately, but you might not be able to find the number," Sullivan says. Further problems could occur once you call -- getting your card number.
"You’re going to need your card number, but who gets paper statements anymore?" Sullivan says.
Avoid Department Store Cards
Padawer is not a fan of department store credit cards.
"Credit cards are some of the most expensive debt out there," he says. "Department store credit cards are the most expensive credit cards." The interest rates are usually higher than what you’re going to get by just walking down to the bank and applying for a new credit card or filling out a form you get in the mail.
Pay Cash When You Can
Especially when carrying a balance, it’s best to use cash. "People who carry balances tend to keep them around like years for pets," says Padawer.
Credit is a great tool; like any tool, it can be used for good or for ill. Follow these tips, and you can ensure that you have the right kind of tools in your credit toolbox.
--Written by Nicholas Pell for MainStreet