5 Situations when you should avoid using credit cards

January 15th 2013

A great number of people use credit cards to maintain a decent standard of lifestyle. Consumers use credit cards for variety of reasons - to build credit history, purchase products, etc. However, in spite of several benefits, there are certain situations when using cards may harm consumers financially. Go through this article to know about 5 situations when consumers must not use their credit cards.

Situations when it is better to not use credit cards

Here are 5 situations when you must avoid using your credit cards by all means:

1.When you're about to exhaust your credit limit

It is better to not use credit cards if you have nearly exhausted your credit limit. This is because once you have exceeded your credit limit, your credit score will get hurt. You may ask your credit card issuer to raise your credit limit if you're about to cross your limit.

2.When the interest rates on the credit cards will increase

It is advisable to avoid using credit cards when the interest rates are about to increase. According to the Credit Card Accountability, Responsibility and Disclosure Act, the card companies have to give you a 45 day warning before hiking the interest rates. However, the new rate will kick in from the 14th day of the receipt of that notice. During this time, you should stop using credit cards and negotiate with the company to go back to the old interest rates.

3.When you don't have the money to pay off the credit card bills

If you don't have the money to pay off the bills, then wait until you do. It is a fact that late payments get reported on credit report and hurt score big time. For instance, a consumer with 690 credit score will lose around 60-80 points for a 30-day late payment. Therefore, if you can't afford to repay the bills, then stop using credit cards and start saving money for repaying them.

4.When it is past midnight

It is better to not use credit cards past midnight. The reason is, it has been observed that people are not able to make right financial decisions after midnight. Hence, if you're at a night club, casino or a hotel, then it is advisable to go back to home as early as possible. Keep your credit cards away and use them in the morning.

5.When the interest rates are going to drop

If the interest rates on the credit cards are going to drop in the next few months, then the wise move will be to not use them now. There is no point in paying higher interest rates now when they will go down within few months.

Last but not the least, it is advisable to not use credit cards for paying those things that you used to pay in cash. You must always check your credit card bills periodically. This helps you know the areas where you're spending more money than what is necessary. If you find that you’re spending more money on traveling or car repairs, then make a separate budget for those things instead of using credit cards.

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