Using Credit Responsibly

Having credit cards certainly increases your spending power, but they don’t necessarily increase your financial discipline. In fact, often times having more credit than you need or can handle is a recipe for disaster. Here are 8 tips which govern responsible credit card users.

  1. Borrow only what you can repay. Just because you have the credit available doesn’t mean you need to spend it. Smart borrowers know what they can afford and borrow accordingly.
  2. Read and understand your contract. It is critical to make sure you read and understand any contract or agreement that you sign. Make sure you are aware of how interest, fees, penalties, and payments all work with any card you use. This helps avoid any unexpected surprises.
  3. Pay debts promptly. Being aware of your credit card’s due date seems like common sense, but many do not pay attention to this, which bringing on unnecessary late fees. Be aware of your due date, pay your bill off in full each month when possible, and if necessary, only allow balances to linger a few billing cycles so interest doesn’t accumulate.
  4. Notify creditors if you cannot make your payments. A responsible borrower will always let their creditors know if they are unable to make a payment for any particular reason. Hiding from creditors only exacerbates the problem. Being up front and honest will keep lines of communication open and will allow arrangements to be made that benefit both parties involved.
  5. Avoid buying on impulse. Carrying credit cards has the potential to create an unrealistic sense of entitlement when it comes to spending. Impulsivity is a real risk if you allow it to creep in. Stay disciplined and don’t buy anything you haven’t researched and planned to purchase in advance.
  6. Report Lost or Stolen Cards Immediately. A lost or stolen card can happen to anyone, but it’s how you respond to those unfortunate situations that matters. Be sure to place fraud alerts if your accounts have been compromised and report it immediately to your creditor.
  7. Don’t give card info to anyone who calls. It is best to make a habit out of never giving out credit card information to someone who calls you unless they have verified your identity and you are certain the call is legitimate. Instead, in most cases try to place the call yourself and only give the information to those you know and trust.
  8. Only give out card info online on trusted websites. Only enter credit card information on trusted secure websites. In addition, never click on a link in an email that directs you to a page asking for credit card information. This sort of activity is almost always fraudulent.

Bottom line, credit cards are powerful tools that can be used to bring flexibility and security to your financial life. But use them responsibly or they will bring more harm than good!


About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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