Originally posted on Crosswalk.com's Live It Channel, bringing you today's best advice from Christian books.

Used responsibly, credit cards are an advantage to the consumer. Just be careful. The credit business is highly profitable for the issuing card company, as long as you stay in debt. The combination of interest, cash advance charges, and other fees gives the credit card issuers billions of dollars of profit each year. Billions of your dollars.

What you need to know about credit cards:


  • Credit is a loan. It is borrowing money you will have to pay back - with interest - from your future earnings. Credit holds hidden costs. Finance charges and interest add substantially to the cost of your purchase, as do late-payment penalties.

  • Credit enables you to take advantage of a good deal. Only if you are able to pay your credit card balance each month does it make sense to buy bargains. If you purchase something at 20% off, but your interest rate is 18%, you saved only 2% - and that is if you pay your balance by the second month.

  • Credit helps establish a favorable credit rating. Creditors put your income and your bill-paying history under a microscope when you apply for a loan - or mortgage. Married women should establish credit in their own name, not just their husband's.

  • Beware of low-interest deals. Companies might offer to consolidate all your debt at a low interest rate for a few months. After that, the annual percentage rate (APR) jumps sky high and you're hooked. The APR is how much interest your credit card company charges you. But many companies calculate interest based on the effective rate, which is the rate after they factor in the finances charges. In other words, 18% interest may really mean 19.56% that you're required to pay.

  • Look for credit cards with no annual fees. If you are paying a fee, call your company and announce you would like the card for free. Co-branded cards, which charge an annual fee, are relatively new in the credit industry and may be a sensible consideration, provided there are no high annual fees or high interest. Under a co-branded system, credit card firms team up with car makers, airlines, and other businesses to offer rebates or incentives (frequent flier miles, money off on the next car) to card users.

  • Look for credit with a low interest rate. Ask your current company for a lower interest rate or shop around for a lower rate.

  • Do not borrow on your credit card. Not only is a cash advance usually billed at a higher interest rate than your other purchases, it often carries a fee of up to 4% which is added to the balance of what you owe.

  • Credit provides false security. Plastic in your hand gives you a false feeling of power and control.


Tip: If you don't trust yourself to be responsible in the use of your credit card, do what one financial counselor recommends: freeze it in a mayonnaise jar filled with water. The narrow neck of the jar, along with the fact that you can't microwave it because of the metal strip on the back of your card, gives you a cooling off period.

Cynthia Yates was named one of the top 10 "Frugal People" in America by Family Circle magazine. She hosts a weekly radio program in St. Louis, and is the author of 1001 Bright Ideas to Stretch Your Dollars and The Complete Guide to Creative Gift-Giving.

From Money and Me by Cynthia G. Yates, (c) 1999. Used by permission of Vine Books, an imprint of Servant Publications, P.O. Box 8617, Ann Arbor, MI, 48107, 1-800-458-8505.