Credit cards are fast replacing cash as the currency of choice of today’s shoppers, diners, and buyers. Credit cards offer several advantages: they allow credit card users to do away with carrying large amounts of cash; if used properly, they can save money; and they allow credit card users to buy things they need on an emergency basis, even with little or no cash on hand.

In the wrong hands, however, credit cards can be dangerous. Using them can conjure up the illusion that no money is being spent, so that credit card users can easily fall into the trap of spending and spending without monitoring their spending habits or coming bills. If bills are not paid on time, or incompletely, large interest rates may be imposed on succeeding bills, making the amount due even larger and more difficult to pay. Credit card thieves, moreover, never rest: they can steal your identity through credit account records, and you may find yourself the victim of a scam if you are not careful.

Credit cards, however, can be your best personal finance tool. They can allow you to save your cash for expenses that cannot be paid for by credit card, such as snacks or transportation. They can also force you to save money to pay your credit card debts. If used properly, credit cards can teach you to handle your finances better.

Start it Right

Here are seven tips that you should remember when you use or apply for a credit card.

1. If you are a first-time user, ask for a low credit limit, or use only half of your credit limit each month. This will force you to set limits on your purchases, so that your credit limit does not run out when you suddenly need the credit card for a major emergency purchase, such as a computer, cellular phone, or laptop.

2. Get a credit card with incentives, especially airline miles. Some credit card companies offer cash-back packages, where you can get your money back if your credit reaches a certain level. Other credit card companies use your credit as points in order to enable you to earn airline miles. Be careful with such packages, however: they may force you to keep on spending if only to earn a few miles. Study the credit card company’s offer before you choose any credit card.

3. Read the fine print before applying. Credit cards come with disclaimers, and you should understand the fine print before you finally sign the back of the credit card and use it. Read on the taxes you need to pay, fees you may need to settle, and interest rates placed on late or incompletely paid bills.

4. Have two credit cards at the most: one principal to use frequently, and the other as an alternate to use if the principal card’s company is offline. This limits your credit card use, and it will force you to save money.

Use it Right

5. Pay your bills in full. Credit card companies will often ask you to pay a minimum amount, but the rest of your bill will suffer a large interest rate, forcing you to pay even more in the next billing period. If you pay your bills in full, moreover, you are forcing yourself to save money to settle your bills.

6. Keep all your receipts and cross-check them when the bill comes in. Credit card companies can make mistakes in their records, and merchants will sometimes punch in the wrong numbers into your credit card bill. Cross-checking can allow you to not only see if you are paying only for what you charged with your credit card; it will allow you to monitor your spending habits.

7. Set a limit on your credit card use: carry extra cash with you.

With these credit card use tips, soon your credit card will soon be your personal finance tool ally not enemy as how many perceive their credit cards to be.

[image from Flickr uploaded by nbackline]