How to be smart with your credit card usage

Mon, Jul 16, 2012

Financial Advice

It may seem like an obvious statement but there are positives and negatives to owning a credit card, and knowing how to be smart about the way you use one  is crucial. With an economy that’s just as unstable for the country as a whole as it is for the citizens of it, the pitfalls of poor credit usage shouldn’t be ignored. Here we will outline some of the good and bad points of having a card in your wallet.

How to use your credit card correctly

  • Perks and rewards – A great selling point of products and services is what customers can get back, but not enough people focus on them. Anything from cash back to plane tickets, gas cards to low introductory rates can be on offer so always check the criteria and be sure to rack up the points – they all add up.
  • Pay in full – The big worry with a credit card is falling behind on payments. Cater for this by paying off each month’s amount in full. It takes honesty and discipline but paying off your debts as soon as they arrive is the best way to continue financial prosperity.
  • Think about the end game – At some point you are going to need a solid FICO score, and this will only be possible by understanding and sticking to your commitments. Getting a credit card is basically the easiest credit line to get approved for, so use it to your advantage. Show lenders that you can be trusted and mortgages or loans will be easier to come by in future.
  • Emergencies – Without a doubt, the best reason for having a credit card is to get through tricky situations. That doesn’t mean buying the new FIFA or a TV but getting around a questionable credit history or using it to keep up with the inflated cost of living to make ends meet. By no means is it an emergency fund, but it can be if you use it correctly.

Incorrect credit card usage

  • Everyday purchases – A credit card isn’t a substitute for cash, and this is a potentially damaging habit to get into. Debt is quickly onset by this type of usage and any purchasing of gas, food or clothing should be done through a debit card.
  • Pay the minimum – The opposite of the last list, many people enjoy the thought of making minimum monthly repayments. This is another bad habit because your total debt amount continues to rise and makes the end payment far higher than it should be – or would have been if you made the maximum payments.
  • Having a borrowed life – Regardless of the limits on your card, you know what you can afford and you need to understand this. If you know you shouldn’t be splashing out on a television then don’t do it. Things are unlikely to get easier next month.
  • Not considering credit score – Whatever you do in life has an impact, and some are hugely negative. If you don’t know the end game you’re looking for then you can use your card badly. Namely, don’t close cards that hold a balance.

These are some pointers to help you wise up with your credit card. But, be warned, credit cards are certainly not fool proof. And, if you start to spiral, remember that it’s very hard to get back on track. Done right, they can be a huge advantage to life, but done wrongly and it can impact on every part of your life.


, , , , , , , , , , , , , , , , , , , ,

Leave a Reply

CommentLuv badge