Wondering if credit cards are bad for you? Are you considering applying for a credit card? If you think you’ve got it all under control, there are some dangerous things about using credit cards, so it’s important for you know them. Read these 4 things you should know before you start using your credit card.

#1 They Encourage You to Spend More Than What You Have.

The goal of credit card companies/banks is to get you to spend more than you actually have, which essentially means you borrowing money from the company at a high interest rate. Through advertising, companies will encourage you to splurge on gifts, vacations, goods and/or services with easy payment terms. Most studies show that people shopping with a credit card will spend more money than those shopping with cash. While this is good for the merchants/stores and for the credit card companies/banks, it’s probably not good for you.

#2 They Charge High Interest Fees.

In the Philippines, banks usually charge interest of around 3.5% per month on the unpaid outstanding portion of your credit card. Which means, as long as you pay the full balance each month, you don’t have to worry about paying interest charges. In general, the higher your unpaid outstanding balance, the greater interest charge you’ll have to pay.

#3 They Charge Numerous Fees.

While credit card companies make a lot of money on interest charges, they make nearly as much on fees. If you pay your bill past the due date, you can expect a hefty Late Payment Charge. If you want a special-reward credit card, you may need to pay an Annual Membership Fee. If you want to transfer a balance from one card to another, you can expect a Balance Transfer Fee. If you use your credit card abroad, you’ll likely find a Foreign Exchange Conversion Fee. If you pay your bill under an auto-debit arrangement facility with a bank account with insufficient funds, you can expect a Penalty Fee. If you are not careful with your credit card, it’s possible to pay more in fees than in interest.

#4 They have a Deceiving Minimum Payment.

When their credit card bill arrives, many assume that only a very small payment is needed aka ‘Minimum Payment’. This small payment, however, will cost you a lot of money in the long run. Credit card companies set the minimum payments low to extend the loan as long as possible. This, in turn, means paying more in interest. Minimum payments are often only 3% to 5% of your outstanding balance, PLUS the sum of all interest, fees, and other charges in the current statement

Me, Myself and My Credit Cards

I confess, I own three credit cards but I’ve never thought of using credit cards often. Everyday, I challenge myself to only using cash or debit cards to make purchases. When I go to the grocery store or eat out, I usually just leave my credit cards at home and use cash or my debit card instead. I only use credit cards on needed expenses like travel, purchases online or on things I know I can afford to pay within the month. By using cash and spending only what I have in the bank, I always have enough.

From personal experience, I’ve never had problems with credit cards because I’ve been using them properly and responsibly. There are three main reasons why I use my credit card: 1) Instant Gratification. Rather than taking time to save up for something, I just charge it and walk out. All I have to do is to responsibly pay the bill for a couple of months. 2) Safety and Convenience. Credit cards are an easy and safe way to shop especially when shopping on the Internet. 3) Rewards. Many credit cards offer great rewards, such as cash rebates, discounts, goods and frequent flyer miles.

Here are some guidelines I follow on using a credit card responsibly. That way, you can also take advantage of the good things credit cards has to offer.

To use a credit card POSITIVELY:

Pay your credit card balance in full every month

Pay your credit card bills on time

Apply for only credit cards that are needed

Keep track of all your credit card charges by keeping receipts

Check your monthly billing statement for errors

AVOID the following when using credit cards:

Making late credit card payments

Paying only the minimum payment

Exceeding your card’s credit limit

Charging items that you can’t pay off immediately

Owning too many credit cards

Before using your credit card, evaluate the way you handle money and determine whether it’s smart for you to use credit cards. Using credit cards are never a one-size-fits-all thing, so don’t get caught up in the hype and think that just because everyone else is using it you should be using it too.