Three Things To NOT Use a Credit Card To Pay For

Credit cards can be valuable tools to help cover unplanned expenses and can help really boost your credit score when used correctly.  At the same time, though, credit card debt can spiral out of control easily leading to a damaged credit score, a lot of stress, and hefty interest on a large balance.  Here's three things to avoid using your credit card to pay for:

1.     Down Payments – If you are looking at a large purchase that requires some sort of down payment, it’s best to opt for your own cash instead of a credit card or cash advance.  With purchases that require down payments, you are likely going to have a loan with a monthly payment and interest already, so paying interest on the down payment too only hurts you in the long run. 

2.   College Tuition – College debt is a very real situation for many students, but avoiding credit cards as part of that debt will help you graduate to the best financial situation possible.  Opt for student loan options that typically have lower interest rates, more manageable monthly payments, and offer the flexibility of waiting until after graduation to begin repayment. 

3.  Special Events – Whether it’s a big family vacation or a wedding that you are faced with financing, take a look at other finance options before swiping that credit card.  Don’t damper your special event from the get go with the interest rate that comes along with many credit cards.  If you don’t have the cash to pay for that vacation or wedding, look at other ways to finance like a secured fixed rate loan or even a home equity option that could give you a clearer repayment plan and often much lower interest rate.

A best practice on using credit cards is to only use them to purchase items that you know you can pay off in full.  We know that can sometimes that can be easier said than done though, so if you find yourself in a credit card situation that you aren’t sure how to handle give Honor a call.  Debt consolidation and balance transfer options might be an option that your local credit union, like Honor, can offer to make credit card repayment a realistic and manageable goal. 

Don’t forget to follow us on twitter @honorcu and let us know what you want to hear about next week using #askhonorcu! 

Teaching Your Teenager To Make Wise Financial Decisions

You have a young teenager that is just old enough to start making decisions on their own, but you are still a little nervous to cut them completely loose to make their own financial decisions.  So what do you do?  Well, you are in luck!  There are easy ways that your credit can can help with to provide your teenager financial freedom to set them on the right path to wise adult financial decisions. 

1.     Prepaid Cards – Prepaid cards function essentially like debit cards except they aren’t tied to a checking or savings account so they cannot be overdrawn.  Your teenager can only spend what’s available on the card to spend.  So you have the peace of mind that your child isn’t overspending and your teenager gets to learn how using a card works!

2.  Debit Card Customization – Think your teenager is ready for a debit card?  While debit cards are tied to a checking account and can be overdrawn, you can set limits to help minimize the odds this happens.  Customizing the options on your teenager’s debit card with features like low daily limits, pin or signature only transactions, and no cash withdrawals can help graduate your teenager to a real functioning debit card without all of the features that could get them financial trouble if they don’t quite know how to manage them. 

3.  Online Banking & Budgeting – There is no better way to grasp the concept of money in-money out than reviewing what you have spent each month.  Have your teenager “balance” their account and look at what they have spent their money on.  The concept of how quickly money can be spent will sink in very quickly when your teenager looks at the big picture using online banking or a budgeting tool, like Honor’s Money Desktop! 

What other ways do you help your teenager learn about responsibly managing their money?  Let us know and don’t forget to follow us on twitter @honorcu and let us know what you want to hear about next week using #askhonorcu!