How to Use Your Credit Card Wisefully

Credit cards also are recognized as the means which can cause fairly emotional associations – people working with or using credit cards consider them very helpful and fast, on the other hand, there are those who state that credit cards can be dangerous and not always favorable for using. Credit cards, their functions, and their proper application are essential to know as a college student. Here in this article, you are going to learn these aspects of credit card usage which are going to help you to take the right decision.

Understanding Credit Cards

A credit card is a plastic card that has been provided and agreed to be used by a certain bank and/or a certain financial company that will allow a person to buy something on that card. A credit card is different from a debit card in that while the debit card accesses your bank account directly and lets you use your money, the credit card offers a line of credit that you can spend, and then make payments later. They have a certain credit limit for every card, which is predetermined by the issuer considering the client’s financial record and credit rating.

This is the case whenever you employ a credit card because the credit card is a technique of borrowing money from the credit-granting bank. You have what is called a window period, that ranges from one to thirty days, to pay an amount borrowed. In simple terms, interest will go with the outstanding balance if you are unable to pay the value in full at the due date. It is important to get to grips with this basic characteristic of credit cards if using them successfully.

Benefits of Credit Cards

Credit cards offer several benefits when used responsibly:

• Convenience: These are recognized and can be used for web and offline purchases in any part of the globe.
• Building Credit History: Punctual, frequent payment contributes to the construction of credit history on which people depend on especially when applying for loans and credit facilities.
• Rewards and Cash Back: These include cash back, travel-related rewards, and ‘rebates’ when the card is used to buy something.
• Purchase Protection: People who use credit cards get protection concerning purchase protection covering warranties and protection on the purchase against fraud.
• Emergency Funds: It can also be used for emergency when you need cash in short term then it can be useful.

Assessing Your Financial Readiness

It is crucial to analyze one’s spending behavior and preparedness before going for a credit card. Ask yourself the following questions:

• Am I a compulsive spender?
• Do I run to buy things without thinking about the money that I should be saving?
• Am I sometimes able to act without regarding promotion information?

If you answered yes to these questions, increasing your financial literacy before taking a credit card is very useful. Learning efficient money management will assist you to avoid credit card frustrations by assisting you to make the right decision.

Key Factors to Consider

Here are key factors to consider:

• Interest Rates: Find out the differences in the Annual Percentage Rate (APR) on the various cards. Fewer points above the prime rate mean lower interest are being charged on the balance if any is rolled over to the next month.
• Total Annual Cost (TAC): This is the cost of the card as presented by the financial institution in form of fees and expenses in form of interests.
• Rewards Programs: One should search for cards that have attributes that come with rewards that he or she can benefit from especially in his or her spending pattern such as cash back, travel and other points.
• Additional Fees: It is important to know any extra charges that apply for instance foreign transaction fee, balance transfers fee and fee for late payment.
• Credit Limit: Think on credit limit that was granted and make sure it is sufficient for consumers so that they don’t go overdraw but is not too high that they will.

Using the Cash Back and Offers

Another advantage that people get when they use credit cards is they are allowed to earn some points on the amounts they spend on. There are usual spending rewards like grocery, dining out, and gasoline credit card with cash back rewards on these purchases. Also, some of the cards have seasonal bonuses throughout the year for instance during the black Friday and cyber Monday events.

The golden rule to get the best out of your credit card is this, be wise when purchasing goods and services. We need to buy merchandise that pays us cash back or other incentives, that we use. The following strategy is likely to assist a card holder in effectively utilizing his/her card and at the same time avoid unnecessary expenditure.

Utilizing Interest-Free Installments

It can also have free installments as one of the major attractions of having a credit card. If the item is an expensive one, it enables you to tap the line of credit and buy the item and pay it off in installments without attracting interest charges.

Here are some tips for using this feature wisely:

• Plan Your Purchases: Always consider making interest-free installment for products which are essential and already in the planning of purchasing. Avoid impulsive buying.
• Budget Accordingly: Always be in a position to afford the monthly installments comfortably any other budget peg.
• Monitor Your Installments: Ensure that you make a record of the several installments you have and avoid making several installments that you get pressed on, with the intention of repaying the installment.

Managing Your Expenses

Lenders consider the amount of credit utilized by the clients over a certain period, it is recommended that the ratio of credit limit utilizations should not exceed 30%. Another method which is executive as the first practice is to ensure that one’s credit utilization ratio is low.

Here are some tips for managing your expenses:

• Plan Your Purchases: Always make a provision of the expenses that you are going to incur on your credit card.

Paying on Time

Punctual payments are very important to ensure that credit history records reflect a favorable history. If you ensure you pay your credit card bill on the due date, then the only amount of money you part with is the balance that is owed to the credit card company without charging any interest.

Here are some strategies to help you pay on time:

• Set Up Reminders: You can set up personal notifications like those that you receive on your calendar or your smartphone for payment reminders.
• Automatic Payments: To avoid missing a payment deadline, make use of automatic payments with your bank regarding the credit card bill.
• Direct Debit: Again, in some banks, there is the direct debit option where the payment is debited from the account on the due dates.

Avoiding Minimum Payments

If you think that the best way to avoid a high credit card bill is to pay as low as possible amount stated on your credit cards you are wrong because you will end paying much higher interests and being in credit card debts for a long time.

Here’s why you should avoid making only the minimum payments:

• Extended Debt Period: Minimum payments mean, you’ll be in credit for years, because it will take longer to pay off the debt.
• Financial Strain: The interest charges tend to increase with time leading to complications of making the desired payment to discharge the principal amount.

Regularly Reviewing Account Statements

It is equally important to regularly go through your account statements so that you will be able to identify fraudulent transactions.

Here’s how to stay on top of your statements:

• Monthly Reviews: Spare time each month to sit down and go carefully through all the details indicated in your credit card statement.
• Check for Errors: Also, seek for any extra charges or any other things which seem unusual and notify your bank about these charges at once.
• Budget Adjustments: Ensure that you use the statement review to correct your budget and spending in the unfortunate event you have gone off track.

Cultivating a Healthy Credit Status

Credit score remains a central cog in personal finance. It determines the amount of loans that you qualify, the interest rate to be charged on the loans as well as tuitions, courses or even apartments and jobs.

Here are some tips for building and maintaining a good credit score:

• Timely Payments: Never miss your dates with your bills. Delays have bad effects as they may lead to lowering of credit status.

Using Credit Cards in Emergencies

Credit cards also prove to be essential in emergent situations since it grants a chance to access cash whenever it is needed.

However, it’s essential to use them wisely in such situations:

• Assess the Necessity: Make sure that the situation you are in calls for the usage of a credit card. Ensure that you do not use it to fund other expenses that are not fundamental at that particular period.

Other Important Guidelines to Credit Card Usage

• Avoid Cash Advances: When taking cash advances, the fees as well as the interest rates are normally on the high side. The latter should only be used when is completely necessary.
• Utilize Alerts: Add transaction alerts as they help in tracking down spending and can easily tell when the card is used without permission.
• Understand Your Rewards Program: Take your time and study the process of operations of your card rewards program for the best part of the bargain.
• Review Fees and Charges: It assists in identifying the various fees as well as charges that relate to the card account to eliminate surprises.

Conclusion

Credit cards, if managed pragmatically, are among the best financial inventions that has blessed mankind. They are advantageous because they are readily available, they accord users with incentives, and enable them to establish credit. But achievers know very well that responsible management is the key. It is for this reason that when someone decides to acquire a credit card, they should consider the type of card, use of credit cards wisely, ensure to pay the dues on time, and also on how to use the benefits of the credit card without necessarily falling into a debt trap. Be curious and unemotional to keep the financial health a high priority.