8 Tips on Using Credit Cards Wisely

27 March 2019

Your credit is just like your health. If you do not manage it wisely, you will have to deal with some serious issues later. Most of us prefer to use credit cards so that we do not need to carry cash, which is a security risk, as well as it being expensive to withdraw cash from the ATM. However, many people often end up in credit card debt because they were unable to manage their credit properly.

Credit card debt can easily become a debt trap and it can be very hard for you to get out of this trap once you are stuck. It is therefore important to be conscious of the risks and know how to use your credit wisely to avoid the pitfalls. Here are some credit card tips to help you stay out of debt.

1.    Create and stick to your budget

As discussed in the article published by Learnalot, ‘Your first step towards financial freedom’, the first, and most important, thing you should always do is create a budget. Whether you are planning to use your credit card or not, you should know how much you can afford to spend on your credit card every month. In this way, you will be able to accurately anticipate your credit card bill that you will have to pay at the end of each month. Maintaining a budget will also assure you that you are financially stable and you will therefore not have to worry about getting yourself trapped into credit card debt. Maintaining and following a budget might take some time but it will bring financial benefits in the long run.

2.    Borrow only what you can afford to pay

The biggest mistake that many people make is that they buy expensive items, such as electronics, on their credit card because they are unable to afford it otherwise. This is a big contributor towards people falling into credit card debt.

It is important to stick to the first rule of financial wellness, you should only buy items using a credit card that you can afford without the credit card as well. In this way, you will be able to pay all your bills, including your credit card bill, on time. Therefore, while you are shopping with a credit card, make sure that you know what you are buying and that it has been included in your monthly budget so that you can be confident that you will be able to pay the bill at the end of the month.

3.    Always pay your bills on-time

One of the biggest mistakes that many people make is that they do not pay their bills on-time. This results in interest being charged on the overdue credit card bill and consequently ends up with people falling into the debt trap as the amount owed steadily increases. Eventually, it will get harder and harder to pay off the debt.

Therefore, it is better to pay your bills on-time. It is always a good idea to also set payment date reminders for yourself so that you remember when you need to settle your credit card bill. In this age of technology, online payment methods are available, making it easy to pay your bills online without being late or having to go into the bank.

4.    Pay more than a minimum

Many people are unable to pay their full credit card bill on-time, and therefore often choose to pay the minimum amount required to ensure that they will not have to pay any interest on the overdue amount. Remember that if you continue paying the minimum amount required, it will get harder and harder for you to pay the bill the next month and it can start spiraling into a debt trap. As a result of this, it is recommended that you should always pay more than the minimum amount owed. In this way, you will be able to manage the payment the next month. The more you pay, and the sooner you pay it, the quicker you will clear the credit card debt and minimize any chance of having to pay interest.

5.    Check your credit report regularly

There are many people who do not check their credit report until they need to apply for a loan or any other financial help. When you are using a credit card, checking a credit report is crucial. There could potentially be some mistakes in the report that you are not aware of, yet they are affecting your credit score. As you start checking your report on a regular basis, it will become easier to spot the issues and have them resolved. In this way, you can ensure that you maintain a positive credit score. Never compromise on your credit report.

6.    Use rewards points

The biggest attraction to using a credit card is that the more you use it for shopping, the more reward points you will earn. You can then use these points while you are shopping or take advantage of the discounted products offered by your bank. Reward points will enable you to save some money in your monthly budgeted expenses. Just keep in mind that you must never waste your reward points, as this would be the same as wasting money. Whenever you are planning to buy something big it is better that you use your rewards points that you earned, as it will lessen the bill that you will need to pay at the end of the month.

7.    Look for the best deals available

When you are planning on shopping, there are often different deals available. In addition, your bank also sometimes offers special deals and discounts to their credit card holders. When budgeting for a big purchase, such as a television, it can often benefit you to wait for a good discounted deal before buying. It will not only allow you to save a reasonable amount of money and get the best quality out there, it will also ensure that you do not have to worry about paying an expensive bill when you can’t afford it. Make sure that you are always on the lookout for discount deals and offers.

8.    Consider the hidden fee

Some banks have hidden fees when it comes to credit cards. They often do not reveal this fee to their customers, and it can result in you having to pay more than you expected each month. It is very important that you always read the bank’s credit card terms and conditions properly. Banks are required to stipulate such hidden costs in their terms and conditions and therefore by carefully reading them before signing up for a credit card will ensure that you know about all the hidden fees. Only get the credit card from the bank where you will not have to deal with any hidden fees.

When you apply for a new credit card make sure that you lower it’s limit rather than having a high limit. Ensure that the limit of your credit card is always quite a bit lower than your monthly income. In this way, you will then be able to manage your credit properly.

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