Credit Basics

Credit is the use of someone else’s money when you have the availability to pay. The shop owner may offer you credit if you have left your wallet at home and he knows you will return to make the payment.

Debt is the use of someone else’s money because you are not in a position to pay for the item with your own funds. A mortgage for a home is the most common form of debt because few people have the ability to save enough money to purchase a home with cash.

Credit can be the perfect way for an entrepreneur to make the most of available assets. Reading the fine print on credit agreements, staying organized and doing a little basic math allows the entrepreneur to use credit cards instead of finding that the credit cards are using the entrepreneur.

Best Tips for Using Credit Cards

Know the due date for payments (and the cut off time for that day). When in doubt, pay early. Paying late will result in late fees and an increase in percentage rates.

Pay in full. Avoid finance charges by keeping your balance at zero.

Review rewards programs. Some credit cards offer cash back plans on all purchases. Choose a rewards program that works best for the needs of the individual entrepreneur or business.

Keep accounts open. Closing credit card accounts may adversely affect a credit rating.

Compare interest rates. The amount of interest being made on the investments of the entrepreneur should always be more than the amount of interest being paid to use the credit cards.

Read the paperwork. Entrepreneurs can avoid unexpected credit card costs by reviewing all the materials received by the credit card companies. Companies have been known to change due dates or times, interest rates and more by hiding the information in “junk” mail.

Use different cards for different needs. Some cards offer higher rewards for specific purchases. Entrepreneurs make the most of credit cards by using them in a way that reaps the highest payback.

Entrepreneurs should NOT be afraid of credit cards. Keeping the plastic as credit (by only spending what can be paid in full) will allow the entrepreneur to use the credit cards and keep the credit cards from hijacking the entrepreneur or the business.

The last two months have been tight, and I slipped on my payments. The interest isn’t hurting too much, but if I don’t do something fast then I’m going to negate the whole reason for getting the card in the first place – the cash back program.

1. Stop using the card! Go back to paying cash or using the debit card until the credit card is paid in full.

2. Quit pretending. Once interest starts accumulating the rewards programs become moot. Stop acting like money is being lost.

3. Pay before the due date, and pay more than once. As extra money becomes available or as money gets set aside, pay it on the credit card balance. Interest accrues every chance they get.

4. Go back to what works. If the cash isn’t on hand (in the bank or in savings) then don’t charge it – plan and simple.

I made a mistake (which I still haven’t admitted to my hubby, so don’t you tell him ). Instead of getting all pious about it, I’m just going back to what I know works. It will all be sorted out soon enough if I do. It’s waiting that usually ends up getting you in a mess that you can’t deal with on your own.