Most of us have a credit card and a few of us know how to use them well. Knowing how to use your credit cards can be very beneficial for you and can prevent issues in the future.
If used wisely credit cards are a great financial enabler and can be good assets to you. On the other hand not knowing how to manage your cards wisely can lead to many downsides including high-interest costs and credit score downgrades.
We at mymoneykarma.com believe that financial education is the single biggest enabler to help people manage their finances better, and therefore in this blog, we will share those ways in which you can use your credit cards wisely :
Never carry a balance on your credit card
This is the ground rule of using a credit card. Well, most of the people fail to understand that credit cards have a skyrocketing interest rate and it is, after all, a loan in disguise! The more you delay your credit card payment, the more your bank would make by charging you the high-interest amount.
You pay two charges in the case of late payment:
1) Late payment penalty or fees
2) Interest charges on the due amount, which is charged on the unpaid portion.
This makes carrying a balance on your credit card very expensive. Avoid paying interest on your credit card amount by making the paying the payment on time and earning rewards for it!
Late payments negatively impact your credit report score
As you progress in life, your needs increase so your aspirations. Some of the essential utilities in life such as buying a home might need a loan in the future. Or you might need a personal loan to counter an unforeseen situation or you might want a car loan. Before your loan request is approved by a bank or a finance company, your credit history is taken into consideration. Pay your credit due on time or otherwise delay in payments will remain on your credit report and affect your credit score negatively. Lower credit score will be detrimental when you want new loans. Mymoneykarma.com tells you when your bills are due so that you never miss a payment.
Paying the minimum amount shouldn’t be a habit
Try to clear the maximum amount of your credit card balance every month. Just paying the minimum amount every month will increase the duration of your payments as well as heavy interest will be charged on the remaining dues. To clear your debts quickly, pay as much as you can. This will also have a lesser impact on your credit history report.
Use credit card for your necessities, not for borrowed lifestyle
The common mistake made by many credit card holders is that they see it as an easy tool to buy what they desire but might not afford. Though a borrowed lifestyle might make you happy for a short period of time it can get you in trouble as it will increase your debt. Accept that you can’t afford a premium product or luxury and chances are you might not be able to pay for it even after 50 days of taking the credit.
Maximize your rewards
On purchasing at some specific shopping centres or supermarkets, booking plane tickets or paying for a movie using a credit card can earn you great rewards. However, it is important to know if your bank converts those rewards into money and gives you cash back. If you make good choices while selecting your credit cards you can actually get paid for spending.Mymoneykarma.com helps you choose the best credit cards based on your spending patterns and shows you the rewards on all your credit cards so that you can redeem them.
Read the ‘credit card policy’ carefully
With most of the credit cards now being applied online, people often skip reading the terms and conditions or policy agreements. Therefore, many of them fail to realize that not credit cards are same. Their interest charges, benefits, reward schemes and other actions differ based on various banks. Before taking a credit card, go through all available options that offer the lowest interest rate and best rewards program. Evaluate the credit card offers at mymoneykarma.com and choose the credit card that is best suited to your spending habits.
It is important to realize credit cards can be double edged swords and can cut both ways. If managed wisely they are an asset else can turn into a big liability.