An individual needs to use their credit card smartly to avoid credit debts
Credit cards have turned into an essential part of modern day living as they make purchases and paying bills easy without carrying cash. They make life easy and help in keeping documentation of our expenditure and assist us dispute charges for undelivered and faulty things. Additionally, they facilitate us to get reward points. But on the negative part, the credit cards could make you splurge money and get into debt.
So, one need to be intelligent with his/her credit card, one requires to know the rules of the credit card usage. Below are few golden rules on how to use credit cards smartly-
1) Don’t keep many credit cards
It is a true fact that credit cards helps in urgent situations and ease spending. But keeping too many credit cards may possibly persuade us to splurge money, which may increase credit card debts that could be hard to recover from. Additionally, it is best to gain bonus points on one credit card, so that you could en-cash the points more swiftly.
2) Save and retain a crisis fund
Most of us think that credit cards can certainly help in medical and unforeseen crisis, but it is foolish to believe it as a general rule. A much better option would be regular saving for emergency fund. This will avoid getting under the pressure of credit card debt.
3) Repayment ability should decide the credit card spending
It is true that using credit cards instead of cash helps but this formula is only valid for purchases that one can repay for immediately. Consuming more than what you can repay is extremely uninvited and could get you into credit card debt.
4) Ward off cash withdrawals in advance
The best way is to live within your earnings and fend off making advance cash withdrawals even in crisis situation. This can prove to be the worst thing that can be done with a credit card. To save yourself from this trap, design a smart spending plan.
5) Abstain from bank transfers without convincing reasons
Refrain from making balance transfers from one credit card to the other to avoid paying balance transfer charge or else it may further increase the credit card debt that would turn in to a vicious circle. Although, transfer of bank transfers like taking benefits of lesser interest rates could prove productive.
6) Make complete payments on time
For using credit card intelligently you should make the repayments within a month or next billing date. Holding-up the payment could impact your credit repute and make you prone to pay at high rates of interest that are far beyond your budget. Not carrying any balance forward would lighten you from the pressure of getting into credit card debts.
7) Read and learn the credit card agreement terms properly
You must read and interpret the full agreement and other terms and conditions for the use of credit card. This comprises understanding transaction fees levied, interest rates, and under which conditions will increased rates for credit would be charged. This would help out in taking safety measures to avoid getting into increased debt on credit cards.
8) Identify the warning of credit card debt
Many deem a credit card a bonus and fall short of realising that they moving towards the trap of credit card debt. The best signs to identify such situations are like leaping a credit bill to pay another, evade credit card payment statements and charging more than your repayment potential by buying luxuries. Failing to save and sustain a crisis fund could also be another cause.
9) Never allow your credit card to be used by someone else
Don’t confide in others when it comes to the use of credit card even if they assure to pay back in time. It is risky because you will be accountable for the debt and charges. It is quite likely that credit card companies did not assign them a credit card considering certain unpleasant conditions.
