If you wish to secure your future from a financial perspective then you must focus on avoiding debts as much as possible. There are several consumers who fall into the risk zone of debts and lose their financial freedom. If a credit card is used in a proper way then they can provide a lot of benefits and advantages like purchase protection, credit building, etc. A credit card basically helps you a lot when you want to shop and you also do not have to bother about carrying a lot of cash with you all the time.
However, improper usage of credit card can land you into trouble for sure. You must understand that when you repay your bills for the credit card, you are also paying a decent amount of money as the interest. If you are not careful about your expenditures then a credit card can prove to be really expensive as the high interests will keep accumulating. Again, it is not a good idea to skip or delay the payments of your credit card bills. That will hamper your credit score a lot and will lead to other problems in the long run. Once the debts builds up, it is really difficult for a person to get out of the whole mess. The low monthly repayments which is two or three percent of the total outstanding balance and the interest rates can keep a consumer in debt for several years.
Thus, it is very important to understand the best credit card for yourself and knowing how to use it is the biggest priority. Let us understand more about the appropriate and inappropriate ways of using a credit card.
Things that you should not do when using a credit card
- Never charge your card to a limit which you cannot really afford – There are several customers who make the terrible mistake of overcharging their credit cards. Later on, they are unable to make the repayments on time and hence suffer financial loses to a great extent. You must realise that you can only spend what you can repay at the end of the month. Charging your card to a limit that is beyond your reach is not the right thing to do. This will only increase unnecessary debts and your financial stability will be disrupted.
- Do not charge the purchases of food – Let us consider that you used your credit card to buy groceries. When the bill arrives at the end of the month, the items for which you got the bill do not exist anymore. It is not a very good idea to charge your credit card with bills for disposable items and products. Even when you go for a dinner, it is best to avoid using credit cards and, thus, you will be able to eliminate the charges for all those items and things which are not there anymore by the end of the month. Doing otherwise is unwise from the perspective of money management and will not be very effective as far as avoiding unnecessary debts are concerned.
- Avoid taking cash advances – Going for a cash advance on your credit card can lead to very high rates of interest on the amount given out as advance. You will not be getting any grace period to clear your debt and the transaction fees, which are considerably high, will also be charged. If there is no grace period then the accumulation and calculation of the interest starts from the very date the customer takes the advance amount. Although the balance might be cleared out by the borrower by the end of the month, but one still has to continue paying for all the accumulated interest amounts.
- Do not purchase any special service – There are several products like life insurance and credit card fraudulence protection offered by the various credit card companies present in the financial market in today’s world. These typical services are often over-priced and unnecessary for almost all the customers. Hence, it would be unwise to spend a lot of money on such offers and products.
These are certain things should not be done while using a credit card. Now, we shall talk about the things that one could, should or would do to avail the perks of the credit card and make the most of it.
Things that you should do when using a credit card
- Do make a budget for yourself – It is better that you stop relying on the limits of your credit card offered by the credit card issuer and take an initiative to create a budget for yourself so that you can avoid all situations that can lead to a debt. Make a note of the money that you have in your bank account and plan a budget accordingly
- Use the credit card in an emergency – It is practically impossible to avoid a debt situation in an event of emergency. Hence, if it is not at all feasible to make the payments for a particular service or item in cash, do make use of the credit card that you have. In order to keep yourself away from any debt scenarios, make sure that you keep paying for the bills that have been generated at the end of the billing cycle
- Pay the full balance amount every month – Charge your credit card when you are pretty much sure that you can pay off the amount in the end of the billing cycle. You can avoid all the interest charges when you make the payment in full at one go.
- Make the payments on time – Late fees are applicable whenever you delay in the making the payments for the bills generated against your credit card. This can also lead to a hike in the rate of interest to the actual rate of interest mentioned in the terms of the credit card. Ensure that you pay all your credit card bills to avoid any kind of hassles in the long run.
- Read the fine print – The agreement papers of the credit card contains several important information about different things including late fees, default rates and rates of interest. The credit card issuers make a lot of money by charging more interests to the people who skip payments or delay in making the payments. Understanding and analysing the terms and conditions of the credit card will only make things better for you as you will be able to avoid all kinds of unnecessary fees and high rates of interest
- Keep a check on the number of credit cards you own – If you have too many credit cards then it would be extremely difficult for you to keep a track of your transactions or expenses. You are good to go with one credit card. If in need, you can get two credit cards, but definitely not more than that. This will keep your expenses under a check and will help you to manage all your financial problems too.
- Keep a track of all your purchases – It is of utmost importance that you pay good amount of attention to all the purchases that you make so that you can avoid any or all fraudulent activities and errors against your credit card. If you compare the credit card receipts then you will be able to understand if it includes any mistaken or unauthorized charges. Please, contact your credit card issuer and inform them if you face any such thing when you get the bills for your credit card usage.
- Try leaving your credit card at home – The best way to avoid over using your credit card and stay out of the debt cycle is to leave it at home when it is not absolutely necessary. Make purchases using cash and keep the credit card for unavoidable circumstances, when you have to use it.
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