Wise use of your credit cards leads to a lot of benefits. Make Sense of Money offers several tips that can make your credit cards work for you in an efficient and sensible way.
First stop is to choose the right credit card for the right job. While sometimes, people have more than one credit cards, this is okay for as long as these cards meet their specific purposes. But there is always a need to read and understand the terms and conditions for each credit card so as not to be caught by surprise if you see some fees and charges. Even if the list of terms and conditions can be lengthy, take a few minutes to read and understand such details as interest, minimum payment, fees and other charges. If you are not sure of what these terms means, ask around.
Pay on time to avoid extra charges. If you can only pay the minimum monthly amount due, make sure to pay this on time to avoid paying extra fees for late or missed payment. Non-payment can harm your credit rating too, and give you a bad credit history. So make sure to pay on time and the exact minimum monthly amount due. But if you can pay off the balance in full each month that is best way to go to save on interest charges and get you away from a situation where your credit card purchases pile up. Paying off your balance in full each month will also entitle you to certain discounts given by credit card companies.
No matter how tempting it is when you have a high credit limit, don’t use your credit card for cash withdrawals. That is because the interest is charged from the date of the transaction. Also, the interest rate for cash withdrawals from your credit card is usually higher than you would pay for regular purchases. In the same manner, avoid transferring your balance for past purchases from another credit card into your new credit card. This is a vicious cycle that will get you into more trouble later on if you have more credit cards.
Last but most important, never exceed your credit limit by monitoring your spending. Most people exceed their credit limit thinking that they can just wait for their salary and pay their credit card bills higher than the minimum monthly payment. But most of the time, it doesn’t happen. So take the time to list down the purchases you made using your credit card and draw up a monthly budget to see how you will pay your bills. Remember that your credit limit is not free cash and that in the future, if you use it up, you will have to pay your obligations to preserve your good credit standing.
