For many people today, money has never been tighter. While the economy and employment are on the way down, the price for gasoline and other basic needs are on the way up. A lot of Americans live from paycheck to paycheck, broke on payday waiting for the next check. The problem with living this way is that if something unexpected happens (and it does occasionally) then you are unable to fix the situation if it requires a financial expenditure. Things like a flat tire, medical expenses, electric bill disconnect notice, and other urgent matters come to mind.

One option people take is to sign up for a payday loan. This is where a company will lend you a lump sum of money (usually at a max of $1000), and you agree to pay them back within a week or two, along with the accrued interest (which can be as much as 25% for the term and even as high as 1000% yearly). If you establish a good track record with them, they will gradually raise your credit limit as you go. Normally, the requirements are a bank account in your name, a verifiable place of employment with direct deposit activated, and legitimate identification. Once you supply them with this proof, they deposit the loan amount into your bank account on the following business day. The repayment is automatically debited from your account on the due date.

This all sounds great doesn’t it? Well, don’t be so sure. These loans are not for everybody, especially not for people that are awful with money and have trouble paying their bills. It is not a coincidence that some of these payday loan companies (not all of them) don’t check credit before approving you for a loan. They actually prefer people with bad credit. Why? Money, that’s why. People with bad credit will likely request one or more extensions on the repayment date. These extensions can be very costly, some of these companies are outright criminals. In some cases, you would be better off going to the mob for a loan. If you don’t think that you’ll be able to pay off the full loan amount plus all interest in the allotted time, then you shouldn’t consider this type of loan to begin with. These extensions can turn into a vicious cycle that quickly spirals out of control. You can find yourself ultimately paying three or four times the amount of the loan itself in interest.

Payday loans can be a quick fix for you when you know for a fact that you will be paying the money back at the first due date. If there is any doubt, then you risk getting caught up in the endless cycle of penalties and interest, always paying the interest and not the balance. This is exactly what some of these companies want you to do, more money in their pocket. You are better off borrowing the money from a friend or relative, or even taking a cash advance on a credit card.

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Learning how to properly use credit cards is often the difference between someone with good credit and someone with bad credit. Since credit cards are probably the most popular vehicle people use to drive themselves into the depths of credit despair, it is a great idea to set forth rules of engagement when it comes to your credit cards.

Rule one: Don’t purchase consumables with your credit card. Pay cash always.

This is a biggie, buying your morning coffee and bagel with your credit card ensures that you must use your card every single day. You then get into the habit of doing so. Not good. Pay cash like most people do when buying things you eat, drink, or smoke everyday. The credit card should only be used occasionally, any more than that and you wind up paying interest on what? A bagel. You would be the only one at work who pays $8.00 for a buttered bagel. Sounds stupid but it happens.

Rule two: If you don’t have the cash in your bank account to cover a purchase, YOU CAN’T AFFORD IT!

This is another big one. The only exception here is emergencies, and by emergencies I don’t mean that PlayStation 3 just released a collector’s edition of World of Warcraft that comes in a gold plated tin, and you just HAVE to charge it because you don’t get paid until next week. An emergency is having a flat tire on your only car, or the boiler goes kaput. If there weren’t credit cards, you wouldn’t be able to buy something if you didn’t have the money. That is the difference between society before and after consumer plastic. We were able to survive without credit cards for a long time. You should be able to do the same for non-emergency purchases. Don’t make it the norm to live on a borrowed dime, there is no faster way into the poor house.

Rule three: The minimum payment accomplishes NOTHING but putting more money into the pocket of the creditor.

Every time you make the minimum payment, the majority of your payment is likely to be pure interest. That means that only a small fraction of your payment actually goes towards lowering your principal balance. For example, if you make a $100.00 minimum payment on a high interest card, about $13.00 will be taken off your bill. The other $87.00 will be considered interest, or “The vig” in extortion terms. I say that because the majority of creditors are nothing more than mob loan sharks. Actually, worse, at least the mob is honest about what they will do to you if you don’t pay up. Pay as much as you possibly can every month, and if it truly is the minimum, than fine.

Rule four: If you can’t make your payment on time, call the creditor.

The absolute worst possible thing you can do is not pay and not call. This tells the creditor that you don’t take this debt seriously, and will likely wind up with them making a negative report to the credit agencies. That will directly affect your credit score in a  negative way. Call them, tell them you can’t pay right now and ask them for more time. You might get told absolutely not, but at least you made the effort to call them. This ways in your favor when they consider turning the account over to collections or not.

Those are a handful of guidelines that can greatly improve your credit card management. If you feel deep down that what you are doing is wrong, then it likely is. Treat your debts as a top priority and it will show, and the benefits will be many.

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