A credit card is one of the best ways to make urgent payments and purchases when you are out of cash. But it is also a fact that your credit card can be a positive step towards a bright financial future and create a good credit history, or it can lead to a huge debt that may take a couple of years to pay off. This is why experts always suggest both individuals and business owners use this cash-less payment tool wisely to build a strong financial repute.
Whether you are already using a credit card or looking to apply for a new one, below are some tips to help you leverage it to your benefit and avoid unnecessary debt.
Choose a Credit Card Wisely
Before applying, make sure to assess your specific financial needs and understand the rewards, features, and benefits you will get after signing a credit card agreement. Ensure all the benefits and perks offered by the provider are useful and relevant to your needs. For example, if you travel overseas often, choose a credit card that offers air miles or other traveling rewards. And if you often need to top up your other accounts, opt for a card that offers balance transfer features. As an online shopper, move on with a credit card that offers discounts and shopping points, etc. Choosing the right card allows you to enjoy greater perks along with meeting your financial needs.
Use as Little of Your Credit Limit as Possible
Since a credit card is a quick payment solution to make online purchases or for bill payments, it can lead you towards a mountain of debt if not used smartly. That is the reason, experts recommend use available credit limits as little as possible to avoid higher interest rates and poor credit scores. Using a tiny portion of the available credit limit also helps you enjoy better credit scores so you can easily apply for different sorts of financial assistance like a personal loan or another credit card. A rule of thumb is to use your available credit limit of less than 30% to keep your credit score in your favor. Because a higher credit utilization ratio increases the chances of getting your loan applications rejected by the lenders or financial institutes or they may charge you a higher interest rate for the borrowed money.
Earn while you spend
A lot of credit card companies are out there that offer attractive reward points, cashback, and other perks when the card is used to make payments like utility bills, life insurance premiums, restaurant bills or airline tickets, etc. As a result, you can earn rewards by using your card that later can be redeemed for something totally free or at discounted rates. So, always keep an eye on special offers and discounts offered by the card provider, and never miss a single chance to earn rewards whenever you swipe the card.
Make Payment in Full Each Month
Card providers usually require you to make a minimum payment each month to keep your card active which is normally is a particular percentage of the outstanding balance. It sounds easier and less expensive than making a monthly payment in full. But the truth is that paying a little amount towards your monthly bill can add interest to your outstanding balance every month until it is paid in full. That’s why always try to pay in full each month to avoid unnecessary interest amount. Making monthly payments in full also gives peace of mind and helps you stay on top of finances.
Check Your Credit Card Statement Regularly
A monthly statement is generated by credit card issuers to provide users with a detailed view of transactions made in the recent month. It usually shows information like the description of the transaction, the amount paid, date and time etc. Checking monthly statements allows you to catch any technical errors or fraudulent activities to keep your account in check. It also helps you avoid any unauthorized charges or fees. If your monthly credit card statement contains any unknown activity or deduction from the card provider, report immediately to your card provider for quick correction. Checking your statements on a regular basis also helps you prevent unnecessary spending and build better spending habits.