Credit 101

5 Credit Rules Everyone Should Follow

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5. Charge in accordance with your budget

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A credit card can be a powerful payment method, since it allows you to earn points on purchases and may also get you access to exclusive perks and discounts. But special offers can easily be rendered moot if you don’t control your spending and end up with a mountain of interest-incurring debt instead. To avoid winding up in dire financial straits, Carlson suggests using credit cards in accordance with a written budget.

“This is the [rule] most people don’t follow,” she says, since it’s very easy to think of a credit card as a financial lifeline. However, you need to be sure to only charge items you could pay for even if the line of credit wasn’t at your disposal. You also need to make sure this budget contains a savings plan.

“Don’t use a credit card as a replacement for your emergency fund,” Carlson says. “Credit is a wonderful tool to meet the needs of positive events. It’s not a tool for negative events.”

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