Credit cards are an integral part of our lives nowadays. While these instruments of credit can be used to serve us, it is easier to get into trouble by the mismanagement of the same. As with the case of any financial product, one needs to have proper knowledge and expertise in managing credit cards effectively, to avoid overextending our credit limits and getting into debt.
Here are a few tips on how you can adequately leverage the use of credit card for optimum results:
Keep track of your credit card account regularly
The major advantage of using a credit card is that you do not need to keep an account of what you are spending. The accounts are maintained by the Bank or Financial authority that issues the card. A responsible consumer has to keep track of the payments by periodically checking the statements online and ensuring that overspending is avoided at all costs. The mantra here is to ensure that we don’t spend more than what we can repay. By checking into the online credit card statements periodically, we can a good track of our spending and ensure that we do not cross the self imposed targets. Having the statements in front of us regularly will ensure that we are aware of our spending patterns and implement the necessary curbs wherever possible.
Avoid late payment of credit cards
Credit card companies charge late payment fee when customers that violate the set payment schedules. While these penalties might appear minimal, it works against the entire principal of using an instrument of credit to our advantage. Missing the payment could affect the credit scores of the user, and would act as an impediment in future if we try to secure credit through other institutions. Late payment fee is a burden that we need not bear if we can exert a little bit of financial discipline. It is always recommended to set up automatic payments with the bank to ensure that the deadlines for credit card payments are always met.
Stay out of Debt by paying off the bill in full
This might seem like a challenging proposition, but in reality it is the best piece of advice for a credit card user. A credit card is meant to be used to meet our wants and not our needs. If we are not able to afford the cost of our wants on a regular basis, we should be able to control and curtail them. We do not really need anything that we cannot afford. In some instances the savings we gain out of using credit cards are often eclipsed by the interest we make on the repayments. Hence, the prudent course of action is to pay off the bill in full as early as possible.
Avoid using Credit cards for daily expenses
It is better to use credit cards for only certain dedicated costs rather than to meet all sundry expenses. One of the best ways to use credit cards is to use it for the purchase of high ticket items and then periodically pay off the incurred expense in installments. In such an instance, it is best to make an estimate of the cost and the repayment period before making the purchase. This way we would not be taking on a huge debt. Having a payment plan decided on, in advance, would mean that we are geared up to meet the additional cost of purchasing the item. An alternative method would be to make the purchase after saving up the cash required for the purchase on a periodic basis. Many retailers offer huge savings on the use of selected credit cards and a wise consumer would take advantage of these available offers to reduce the payments they would have to make.
Make the maximum use of Credit card rewards and perks on offer
When we purchase a product, we need to make an informed choice after studying the available options in the market. A credit card is essentially a banking product and choosing the right credit card requires some careful thought. It makes sense to choose the card with the best rewards program, that offer customers a range of incentives like cash-back, frequent flyer rewards, loyalty options, discount offers, zero percent interest fee etc…. Certain cards also offer valuable add-ons like insurance, warranties, price protection, loss coverage etc… Always choose a card that will offer maximum benefits and rewards, as this could work to the benefit of the card user.
One of the major aspects of financial wellness lies in the effective utilization of the available resources. Credit cards do not signify limitless spending. It should instead indicate responsible use of resources. With the right mix of knowledge, initiative and self-discipline, it would be possible to maximize the benefits on offer and avoid the pitfalls that come hand in hand, with owning a credit card.
www.smartmoneyeducation.com will give you a new outlook on managing your finances better.