As consumers, emotions drive our decisions. Neuroscientists tell us that we make our decisions emotionally and intuitively nearly 95% of the time. The forces of marketers and our biases make it almost inevitable that we make irrational money decisions.
1. Shop wisely for a credit card, understanding the hidden fees that may not be worth the perks.
2. Read the fine print– terms and conditions– carefully even after you have made your selection.
3. Pay your credit card bill in full, so you don’t carry a balance.
4. Spend below your means always.
5. Pay with alternatives to credit cards if you are carrying significant balances.
6. Don’t close any credit cards. Instead, cut your card into a million pieces or simply put it in a drawer.
7. If you have multiple cards, decide how to use them for different categories and don’t max out their limits.
8. Avoid cards with annual fees unless they have essential features you will use.
9. Don’t get addicted to credit cards. Limit the number of cards you have.
10. When it comes to paying your card bills, automate and don’t procrastinate. The penalty rates are punitive for a reason.
11. If your child is an authorized user of your credit card, teach them about how to use the card wisely and safely.
12. Be aware of behavioral biases of spending more when using your credit card instead of cash.
13. Review your credit card bills for errors, poor judgment on your part, or to correct impulsive spending.
Marketers appeal to our emotions so that we will be better customers. Their tactics are a fact of life likely to continue if not rise in the future. How you react to these efforts and your own biases is critical. Be aware of your emotions and stop and think when making money decisions.