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Making A Credit Card Work For You

Max Hunter

A considerable obstacle standing between many Americans and the consumer goods they consider a necessary or desirable part of life is a ready way to pay for them. From a new piece of furniture to a car or even a house an age old problem stands in their way: MONEY - or rather how to get hold of it.

A lucky few earn enough to never have to worry about this problem. Many more consumers have lenders simply falling over themselves with offers of credit. For a lot of people, however, a poor credit history or a low credit rating stands as an inexorable difference between living the life they want, and looking with perpetual envy at their neighbor. Even relatively low cost essentials, such as a vacuum cleaner or television set, can be too expensive if a way of spreading the initial cost is not available.

But it doesn’t have to be that way. Credit is available for those with a lower credit scores, but better still: Borrowing even relatively small amounts can be a great way for borrowers with a "chequered past" to improve their credit rating. A better credit score can lead to an array of greater awards in the future, including better APR deals and larger credit lines. If you have a poor credit rating and dreams of one day buying a house, a credit card is the first logical step to pulling up your record and getting a mortgage.

Making regular monthly payments to an agreed timescale on a credit card is - short of scooping a massive inheritance from a long lost millionaire aunt - one of the single best ways to improve your credit score. So long as you don’t take on more debt than you can afford, credit cars are ideal: payments are reasonably sized and flexible, and if you budget properly can be structured towards an ultimate payoff

Moreover, you have to be wise to how credit card companies work. Credit cards are designed by financial institutions as a way to keep you making minimum payments for years to come - and enslaved to large interest payments from which they make many of their profits. Borrow only what you can, and pay back the debt as quickly as possible.

Of course, even when dealing with the very best lenders, trying to secure credit card financing with a lower credit rating does throw up some problems.

Financial institutions will usually insist on a higher interest rate and sometimes may even ask for a guarantor. The interest rate can be up to three times what a good credit borrower would be offered, although in these days of low interest rates, that need not be prohibitively expensive.

Always try and walk before you run. If you have a high interest rate on your credit card, borrow sparingly and pay back quickly. That way you’ll build up your credit score and be able to get cheaper APR in the future, making larger purchases then far cheaper over the fullness of time. If you make a large purchase at a high interest rate and can only pay back the minimum payment each month, with interest charges you could be paying as little as just one of half of a percent of the existing balance each month.

Always keep you balance under control. It can be easy to let your credit card spending run in excess of what you had planned. If you have concerns that you might do so, ask the lender to impose an easily manageable credit limit. That way you won’t spend a dime more than you can afford. The worst time to gain unmanageable balance is when interest rates are at their highest. Do that and it can seem like a lifetime before you get things back under control.

High-risk borrowers should always exercise extreme caution before entering into any financial obligation. Before even thinking about taking on any new financial obligation, consider your budget and ask yourself how much - if anything - you can afford. If you decide that you can, you should still be careful about choosing the right deal.

However, if you can get a credit card that you can manage well, the benefits are enormous. It will enable you to spread the cost of larger purchases over manageable periods of time; you can fill holes in your budget (that are so common in the run up to pay day); and build up a credit history that will enable you to get better APR on borrowings and allow you to borrow money for larger items.

An auto loan or mortgage may seem a distant dream for many Americans with poor credit histories, but everybody has to start off somewhere. Get a credit card, manage it well, and you’ll soon get to where you want.