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Credit Check: Are you using your credit card correctly?

Do you consider yourself smart when it comes to money, more specifically how you use credit cards?

Most likely, you'll answer affirmatively to that question. You can look at your credit card debt and see that you have a decent amount of debt but “nothing you can't handle.”

You pay your monthly minimum payment and while you're not so much getting ahead, you pay on time and the rest you chalk up to blind faith that everyone else has debt, so you do, too.

That passive, hands off approach to credit is the norm relatively speaking. Most accept credit card debt as a part of life, no different than having to pay taxes or get up and go to work every morning. The real issue with credit cards as it relates to debt isn't so much where you are but how you got there.

Do you use a credit card for the right reasons? And, what exactly is deemed “right?”

Let's say for instance you recently landed a new job and you're in dire need of a new wardrobe. That might be grounds for getting out your Visa or MasterCard and hitting the stores, right? Yes and no. To some degree, you need something that doesn't scream “I haven't worked in six months,” so getting a few essentials is paramount. But much like anything else credit related, you have to check the balance on the card and buy with some caution in mind. Moderation makes sense most of the time, and this particular circumstance is no different.

Common sense doesn't hurt, either. Buying a thousand dollars worth of clothing isn't exactly the credit salvation you had in mind as it relates to buying new work clothes.

And what about the real dilemma of paying a credit card bill with another credit card? In this situation, you'd most likely be going the cash advance route, which depending on the issue at hand is credit and debt suicide.

Cash advances typically carry with them a monstrous interest rate to the tune of 20 or 30%, something you'd see out of a traditional department store retail credit card. Cash advances should only be used if there is some money you're expecting to receive (i.e. end of the year bonus, settlement or life insurance policy or something of that ilk). Essentially, you're borrowing money that you'll have within a certain number of days, and you'll pay back the “advance” the moment you receive that income.

Those who use cash advances for things like buying a car or vacationing are the poster children of credit gone awry.

Using a credit card correctly can be the proverbial slippery slope, especially for the people who inherently believe they know what they're doing when in actuality they're a credit disaster the moment the card is swiped.

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