Credit cards can be a real savior. You get to use them when you do not have the cash in your account and pay off the soft loan over time. Some providers also reward you for using these cards to make purchases. It is also a good way to build your credit. However, if you are not careful, credit cards may sink you deep into debt. This guide explores ways to use your credit cards responsibly and effectively.
Take Care of Your Spending
Credit cards provide an easy way to spend and pay back later. While this may be practical when your budget is tight, it is likely to cause you to spend on unnecessary items. The rule of thumb is to spend on essential things and not casual and fun purchases.
In the same breath, just spend what you can effectively pay. The credit card’s limit is the maximum you can borrow. However, you should avoid maxing out on the limit, as it affects your credit score. Lenders look at the credit utilization rate when determining your credit worthiness.
You can always use your debit cards to spend on fun items and gambling. Just know that spending your available cash also affects how much you will spend with the credit card to plug the debt. Therefore, keep your spending within your means. If into gambling and gaming, manage your bankroll conveniently. According to the experts of HeadlineCasinos, responsible gaming is enjoyable and has the potential to make you money.
Make Timely Payments
The most essential rule for credit cards is to pay your balances on time. You may fail to make one or a few payments a year, and this may not seem much. Unfortunately, it leads you to a slippery path of unpaid debt and a low credit score that will take more effort to pull out.
Your loan payment history takes up to 35% of the credit score, and lenders use the information to determine if you are a risky borrower. When you start paying your credit card balances late, you start getting charged fees and interest charges. Over time, the loan amount becomes too huge to manage. Do not just pay the minimum payments for the month if you are looking to avoid the interest.
Beware of Potential Fees
Before you start using the credit card, be familiar with the common fees that you will be required to pay so that you know how to use the set limits carefully. Some of the popular fees include balance transfer fees when transferring the debt to another issuer, interest charges for balances not paid within the grace period, late payment fees, and fees for transacting in foreign currency, among others.
Use this information along with the annual percentage rates to select the best credit card insurer. You can also avoid some fees by avoiding actions that lead to them, such as conversions into foreign currencies, paying your balances late, or hopping from one issuer to another to pay off your debt.
Check Monthly Statements for Accuracy
Always check your monthly credit statements for accuracy. If you do not recognize any transaction, follow up with your credit card issuer for rectification. It also helps to know when you are a victim of fraud. Most cards also have apps that notify you when payments are completed. Consider installing such apps on your device to know when the card is used.
Additionally, checking your card monthly statement also helps know how much you are spending in the particular period. You can use the information to set a budget for the next month and help manage your debt.
Report When Your Card is Stolen
Report to the issuer immediately if you lose your card or believe that the account has been stolen. Your issuer will deactivate the card so that no one can use it to make transactions. Remember, the sooner you make a report, the easier it is for the issuer to track and stop transactions with the card.
In the same breath, do not hesitate to report any purchases on your card that you did not make. You could be a victim of credit card fraud, and more purchases may be made if the card is not stopped. There are cards with fraud detection features that require additional authentication of credit card purchases. Activate them if optional on your card.
Simplify Your Card Payments
If you have many cards, you are likely to have a hard time juggling between them. Luckily, you can consolidate the debt into a single debt where you make payments at low rates. Most issuers have the feature where they accept other credit card balances. Just ensure that you are moving the balance to a card with low-interest rates and limit the use of the cards whose balances you have paid off.
Credit cards are good ways to pay at stores or online when you do not have the money at hand. Use the guide above to use your credit cards responsibly and avoid slipping into debt. Create good debt management habits and monitor your usage to ensure that the card works for you.