Avoid the credit card crunch by thinking first

Monday, November 18, 2013

Whether they have set aside some funds or are planning to fly by the seat of their financial pants, plenty of Oklahomans will rely on credit cards to make the upcoming season bright for friends and family.

But that is not a decision that should be made on a whim, said Sissy Osteen, Oklahoma State University Cooperative Extension resource management specialist.

“Used wisely, credit cards are a great option, but used inappropriately, they can lead to serious, sometimes long-term, problems that can affect multiple areas of your life,” she said. “So, think carefully before whipping out the plastic and scrawling your name on that receipt.”

Credit cards give consumers the flexibility of making larger purchases and they are safer than cash. If your card it lost or stolen and you report it in a timely manner, typically you are only responsible for up to $50 of the fraudulent charges.

Also, credit card companies frequently offer special services to travelers such as round-the-clock access to customer service, flight insurance for tickets purchased with the card and card replacement.

On the other hand, credit cards make it very easy to overspend and you could end up paying far more than the purchase price when you add in possible annual membership fees, late fees and interest on balances that are not paid in full by the due date.

“Given the advantages and disadvantages of using your credit card, start by taking a hard look at your budget, including other debts and expenses,” Osteen said. “Will using credit cards stretch your finances too thin? Will you be able to manage if something unexpected happens?”

For those who decide to take the plastic plunge, stay alert for signals you are in over your head, such as only being able to make the minimum monthly payment.

Other red flags include charging more than you can pay off during the month, hovering at or near your credit limit and maintaining a balance that rarely decreases. Also, do not discount your gut instinct that you might be in trouble.

“The bottom line is using credit is a big responsibility,” Osteen said. “Be smart about using it and it will pay big dividends.”

For more information on using credit responsibly, download free fact sheets on the topic, including T-4157 “The Financial Puzzle: Using Credit Wisely,” at www.osufacts.okstate.edu or contact your county Extension office.