Credit cards can be a convenient way of acquiring money, with the possibility of paying for things in a while. This instrument of payment comes in handy when one is short of cash. But if used in a careless manner, they can lead you to debt and financial ruin.
Here are five ways to use your credit card wisely and not fall into debt traps:
Monitor your spending
Keeping an eye on your spending on the credit card is important to prevent you from spending more than you can. Monitor your spending to avoid splurging. Keeping things simple and being completely aware of all the developments with regards to your spending is very important. You can also limit the spending on certain types of purchases to prevent you from overspending.
Establish a perfect credit limit
Rebalance your card’s credit limit to an amount you can easily handle and pay. A high credit limit can tempt you to overspend, while a low limit can limit necessary transactions. That is why keeping your credit utilization ratio to the lowest possible level is important. You should always try to save funds and resist over spending to establish the perfect credit limit.
Make timely credit card payments
Making your credit card payments on time each month is something non-negotiable. Payments made later by even one day will definitely trigger high interest, finance charges, and late deposit charges, damaging your budget as well as credit score. Payments made on time can be arranged for with automatic payments. This is something that needs to be always kept in mind.
Carefully utilize free offers and rewards
All credit card issuers offer rewards and promotions in the form of cashback or free vouchers. Contact your bank to know about the best offers and shop using a rewards card. Don’t allow doubts to creep in. Carefully understand reward points, offers and any other promotional services. These may also be used to buy things of daily needs.
Do not pay the minimum due only
Although paying the minimum due keeps your account in good standing. Still, it also causes interest to accumulate on the unpaid balance. If possible, pay more than the minimum, or better still, pay the entire balance due to prevent interest fees.
Being clear regarding where you intend to spend is the secret of responsibly using credit cards.
Understanding common pitfalls with credit card debts and avoiding them will enable you to enjoy credit benefits without paying the price on your financial health.
