Credit cards are always classed as ‘bad debt’ but when credit cards are used sensibly they can be a useful addition to your wallet or purse. Unfortunately temptation often gets the better of credit card users and before they know it they are drowning in debt that they can’t afford to pay. So how do you use a credit card to your advantage?

Limit its use to interest free periods

By using a credit card while it is interest free you can technically treat it as an additional cash flow source. This is because you are not paying any more for your purchases in the way of interest. In order for this to work though, you have to have paid the balance off before the interest free period comes to an end. If you don’t, the additional interest means you are paying extra for the things you purchased.

If you can’t pay the balance off by the end of the interest free period you can apply for another card from a different issuer and transfer the balance to that one, assuming it comes with its own interest free offer. Saying this, you should try and keep the balance low enough so you could pay it off if necessary.

Pay the balance off each month

Most credit cards don’t start charging interest on purchases until 30 days after the transaction and so you can use your credit card for emergencies – for example during the week before payday when you’re a bit short of cash – and pay the balance off before the interest charges start. This is a great way to build up your credit rating as well as you are continually borrowing money but you always pay it back within the specified time frame.

If you intend to use your credit card during the month and then pay the balance within the 30 days it is important to keep tabs on your spending. The last thing you want is to receive a huge bill that you can’t pay in full and then have to pay interest on top.

Watch what you use your credit card for

While purchases may be interest free during promotional periods, withdrawing money from a cash machine generally isn’t and you can be charged up to 27% for any cash withdrawals you make. This means that you should never use a credit card to get cash from a machine or a bank and you should consider breaking open the penny jar before doing it!

It is very easy in today’s consumer world to get into a lot of trouble in a short space of time with a credit card – especially when your credit limit is increased on what seems like a daily basis. You can easily play the system though and through sensible use a credit card can be a handy piece of plastic. Just remember to keep an eye on your spending, pay the balance off at the end of each month and make a note of when the interest free period ends.