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Being Credit Card Smart

credit card finances

There are not too many people that don’t have a credit card to rely on, or had one they could use before they maxed it out.   We have become so dependent on the plastic money that we feel something is missing when we don’t have a least one of these credit cards to rely on.

They are also one of the most abused forms of credit available.  Often people are so desperate to qualify for a card that they don’t shop around for the one with the best rates.  They will merely fill out the applications and hope they will qualify.   In most cases they do because the criteria for credit is so loose.

This is where the individuals end up in credit card hell.  On the other hand if a person sets rules for themselves when it comes to credit card use, plus shops around for the best deals cards, then this plastic money can be a great resource.

Self applied rules:

  1. If at present you don’t have any credit cards, or you do have and you have paid them off, then do some smart credit card shopping.   Look for the ones with the lowest interest rates, no contracts, and no additional fees.
  2. Make it a rule that whatever you use the card for during the month that you are going to pay that balance out.
  3. If you have to use your card for a large purchase that you cannot payout in a month, then self freeze the use of the card until you do pay it out. Make the maximum amount of payments that you can each month until the card is cleared.   Remember, that the big item you bought at a great price is actually costing you more because you are paying for it in interest on your credit card.

Chances are you already have one credit card and it’s maxed out and you are looking for another because you have no emergency backup.   In this case follow the same rule of shopping around for the best rates.  However, do not use this card unless an absolute emergency arises where you have no other choice.

If your first credit card happens to be a really high interest rate one, you may be better to get a second card with a lower rate.   Otherwise what happens is every time you pay down your first card you end up using it again and it soon reaches the max limit.   This is like a yo-yo affect. Obtaining the second credit card will only work to your advantage if you are really disciplined and follow the self-imposed rules like the ones we suggested here.   Play it smart in all areas of your finances, which should also include some savvy tax planning.

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Sam Seidman, CPA, CA, LPA
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Toronto, Ontario
M3H 2S3

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Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant

Email: sam@torontoaccountant.ca

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