BP’s Dollar Sense BROOKLYN-USA.ORG
BP Adams offers constituents tips
to jump-start their saving habits
When it comes to spending, particularly
during the holidays, one
question for the consumer often
comes to mind: “Am I paying cash, or
using credit for this purchase?” Your
choices, and how you manage their
outcome, will ultimately make all the
difference in your credit rating.
To be realistic, it’s just not always
possible to pay for needed goods and
services with a debit card or cash.
So if you’re fortunate enough to
have credit cards at your disposal,
it might sometimes just be more convenient
to resort to a credit card for
payment. But as any credit card user
knows, what gets you into trouble is
how much in charges you put on your
cards, and how long it takes you to
pay off the balance owed. A dangerous,
if not addictive mindset can surface
where you think, “I already have
a balance of $2,000 on my credit card
that I won’t be able to pay off in full at
the end of the month, so what’s a few
hundred dollars more?” But this kind
of thinking is what can result in you
fi nding yourself crippled by an insurmountable
amount of credit card
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debt, with you left only able to pay off
the interest on your card, leaving the
principle balance to keep climbing,
along with your interest rate on repayment.
Once again, it all comes down to
budgeting—and spending within your
means of being able to pay upfront or
repay your creditor in a timely manner.
Paying off your credit card balance
in full each month is the key to
maintaining a great credit cards history,
but this can only be done through
budgeting and saving. And if you opt
to use credit, you have a choice: You
can either owe your credit card company
money from month to month, incurring
a heavy interest rate, or you
can have your credit card company
owe you in rewards, such as cash
back bonuses or travel points. Credit
card rewards programs can actually
be quite lucrative and can extend you
perks in savings, but only if you remain
in good standing and if you consistently
pay the balance off in full
each month.
Credit cards and your credit score
go hand in hand, and if, like a school
curriculum, your personal fi nance
management came with a report card,
your credit score would refl ect your
overall GPA. Score high on how you
manage your credit, and you will fi nd
that you have easier access to your
money or a good line of credit available
for those items that you don’t have
cash on hand to use at the point of purchase.
And a history of prompt and
complete credit card payments will
result in you being approved for better
interest rates on the cards that you
use or the credit that you are extended
for big-ticket expenditures, such as for
a car or a home mortgage. The risker
you appear to a lender, the more they
will charge you in interest for the same
line of credit they would offer someone
with a higher score, whom they would
likely view as a less risky debtor.
The bottom line? Spend and repay
within your means, and with cash or
a debit card when you can. Using this
method reduces the risk of you spending
more than you have at the time.
But when paying with cash isn’t an option,
be realistic and mindful of how
you’re using, or possibly abusing, your
line of credit. Pay in full, avoid interest
incurring minimum payments,
and reap the rewards offered by your
creditor, such as buyer protection, access
to early ticket sales, and members
clubs at airports. You may pay a
slightly higher price by paying with
a credit card, though, because merchants
are charged a credit card processing
fee, which is then passed on to
the consumer. But managed wisely, a
credit card can be an indispensable
tool, especially when it is used to its
maximum of giving you the most out
of it.
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