You go for a walk with friends, and suddenly you see the dress of your dreams in the shop window. If you don’t have enough money, this clothing will remain just a dream. But that piece of plastic in your wallet makes unplanned purchases feasible. If you afford yourself something nice or convenient occasionally and then repay it in time, you can enjoy all the benefits of cashless payments.
But if you’re not careful with your spending, you can easily fall into the trap. It can be easy to rack up enormous debts with very little to show for it. As explained on kredittkortinfo.no, you have to learn how to use a credit card wisely to avoid the pitfalls that could ruin your future.
Pay Your Dues
Using credit cards to pay for something or withdraw cash takes only a few seconds. But don’t think it’s all over once you get notified of a successful transaction. You’ve just lent some money from a bank, and you have to get it back within a certain period. This piece of plastic works like any other type of loan. What differs is the fee and interest, which can be quite high on an annual basis (up to 30%, depending on the bank or issuer).
You must learn that it is not worth the risk to let a huge debt linger because of its late payments. Banks usually give you some time to repay your dues without added interest. This grace period usually goes up to 30 days. That means you can delay any payment for up to a month. That’s great if you don’t have enough money right now, but you’ll have it soon.
There are many tips when it comes to using a credit card wisely. The best you can get is to pay off your debt as quickly as possible. Late payments hurt your credit rating and are far more damaging than just not paying at all. Any amount that is not set within 30 days will carry over to the next month and will hurt your credit rating.
Don’t get caught up in the moment and pay the debt within the grace period. If you do get in trouble with banks and issuers, at least they will know how serious of a situation you are in. Credit cards are great, but they aren’t miracles. Use them responsibly, as they can be an excellent way to start building a solid credit history.
Use Card Only when Necessary
The fact that you can buy or indulge yourself at any time sounds great. However, many people misuse this perk. With credit cards, you can very easily fall into a vicious circle of debts from which you can’t easily get out. To avoid this trap, use this payment means only when necessary.
You should avoid buying anything unless you absolutely have to. That way, you will know exactly where your plastic money is going. When you’re within your limit, you can control your spending and possibly save money in the long run.
Try not to get too caught up in getting new lines of debts that you don’t really need. Use your credit cards for convenience shopping only. If you use this means to make a purchase that is not an essential need, you’ll be tempted to use it every time you can. Keep your balance low and use this payment method only when it’s an emergency.
Be Way below the Limit
Credit cards give you a chance to spend money you don’t have up to a specific limit set by your bank or issuer. Sometimes, these financial institutions are quite generous, giving you a very high monthly limit. But that doesn’t mean you should use it fully. Higher limits usually mean higher interests but can be favorable for your credit score even when you don’t use them in full.
Financial experts advise that, whenever you can, agree with the bank on a limit that doesn’t exceed half of your monthly income. This way, you will be sure that you can fully repay the debt every month, even if you reach the limit.
If possible, it would be good not to use over half of the credit card limit. That will positively affect your overall credit score. It shows that your credit limit is high, but you haven’t used it all. You have enough funds to cover unexpected expenses, which gives banks a signal for a positive opinion of you as a client.
You should never use your credit cards to make purchases you can’t afford right away. If that happens, you will just end up in debt, and that is never good. First, it will reflect on your credit history, making it bad. And secondly, you risk bankruptcy if your debts accumulate. When you add the interest, you get a sum that can be quite high.
Have a Few Cards
Many people who are trying to build credit decide to use their credit cards indiscriminately. They max out a primary card, use all their available rewards, and then must start paying off the balances before they can use the card again. This is a no-no.
Having multiple cards can be a good decision to cut off the total debt. This way, your costs will be distributed so that you don’t reach the maximum limit of available funds. If you think that will work, but you still have doubts, consult a financial advisor before requesting additional funds from the bank.
Keep in mind that the balance of all your credit cards must be within your financial abilities. Also, you have to pay fees and monthly maintenance on all cards you have. But that’s a lower cost than an interest you pay for overspending or late installments.
Consider Several Options
When deciding to take a credit card, research the offers on the market. You are not obliged to do so exclusively at the bank of which you are a client. These offers are not always the most favorable. Objectively assess which issuer offers the best conditions, especially one of the most important parameters – the interest rate you will pay for the ‘borrowed’ money.
If you are making a cashless payment, check which options are the best. Banks often work with other companies to provide their clients with more favorable payment terms. These can be a longer grace period on specified purchases or interest-free multi-installment payments. Here’s what you must know when choosing a card issuer.
The great thing about credit cards is that you can rack up rewards for every payment you make. Even when you don’t pay for it, you can get certain benefits like discounts, cash back, free miles, fuel gallons, etc. When you pay your obligations on time, you can get additional benefits (a higher percentage of money-back or discount).
Be Careful with Online Payments
The great convenience of credit cards is that they can be used for online purchases. You can make any payment you want, book a flight, hotel, or rent a car for months in advance. Unlike cash, you can use cards for Internet purchases 24/7/365. That makes it handy when you lurk sales or some favorable deals.
Still, be careful about what you are sending across your credit line. Be wary of putting personal or sensitive data into online payment forms. Only send information that is necessary, and make sure that websites are trustworthy. Keep receipts and payment confirmation emails in a safe place. That way, you’ll avoid scams, information or card abuse, and unnecessary costs.
The economy is fluctuating, and that is a terrifying thought for most people. Because of the volatile market, it may be difficult for you to make ends meet. Credit cards can be a lifesaver, but only when used by the mentioned rules. If you fall behind on any bills, you could find yourself in serious trouble. So you should know how to use this payment method wisely to avoid having any problems with debt in the future.