Tips for Using Credit Cards

We all love to carry a credit card with us, especially when going for shopping. But what will happen if we do not use it wisely?
Credit cards can be an influential financial tool.
However, they can put you in a tricky spot if you don’t use them prudently.
This means it has two different effects – If you use it properly, it can give you an economic benefit.
But if you use it carelessly, it can put you in financial distress.
Most of the credit card users are not aware of how to use it properly.
Today, we will try to have an in-depth look at how to use a credit card wisely without paying unnecessary charges.
The Credit Card Operating Process
Credit cards function differently to the debit cards.
For instance, assume that you’re purchasing goods with your credit card.
It indicates you are receiving a loan from the credit card issuer, which is the bank.
Now you owe the bank money, and the bank gives you a short period to settle the amount. If you pay the owed amount within that period, then you will be enjoying an interest-free loan.
But if you miss paying the amount before the repayment period, high-interest charges start to kick in.
The main business model of credit card companies is by generating interest revenue from the thousands of people who rely on credit cards installments to make big-ticket purchases.

Why Use a Credit Card?

Though the use of credit card seems so costly, most of us love to use them because it brings a lot of benefits than carrying cash.
The top reasons why people use credit cards are:
Convenience – Carrying a credit card is easier than carrying cash, and it is safer.
Moreover, it records all the transactions and purchases automatically.
Thus it helps you to keep an eye on your records.
Protection – Credit cards offer many features for protecting your cash flow.
This means in case your wallet is stolen, you can immediately inform the credit card issuer or the bank regarding it, and you can cancel the card to safeguard your money.
This benefit is not possible if you’re handling your day to day transactions with cash.
Moreover, a credit card also offers insurance benefits for using things like rental cars, etc.
Building credit card history – The credit score usually has a significant impact in terms of personal finance.
If you use the card wisely, then it can assist you to increase your credit score, and thereby, it will help you in getting the best rate on leases, mortgages, etc.
Rewards – Using a credit card cautiously will serve you with so many rewards, such as tour rewards, points rewards, etc.
But if you fall in debt or carry a balance, then probably you will not have those rewards.
So make sure to be free from liability to enjoy ultimate rewards from your credit card.

Essential Tips For Handling Credit Cards

Credit card is an excellent tool.
You will get multiple rewards from your credit card when it is appropriately handled.
Who will say no to a free airline ticket or a five-star hotel stay?
But all these rewards can be obtained if you use it wisely.
Otherwise, credit cards can expose you to years of debt.
Here we have top 5 tips for handling credit cards so that you can enjoy their benefits.

1. Never Carry An Account Balance

This is the essential skill you must develop to be free from debt.
Make it a habit to clear your balance at every month-end.
In this way, you can avoid interest charges successfully.
You also can improve the credit score by carrying out a low balance.
Make sure to register online to get instant access to your account information.
By doing this, you can ensure you’re not spending more than your budget and view the due date to pay off the balance to enjoy interest-free settlements.
I advise you to set up a reminder to ensure you never miss to pay off the balance.

2. Remember The Statement Closing Date

When you clear the entire balance at the end of every month, you’re obtaining a free loan from your credit card issuer.
Note that it is only valid until the due date of the payment cycle. Thus, it would help if you made only major purchases at the start of the statement cycle, as it gives you an additional month until the payment is due.

3. Make Sure Not To Exceed The Credit Card Limit

It is highly crucial to have an eye on the credit card limit, as exceeding the limit will result in fines, extra fees, or even cancellation of your account.
Thus, make sure to examine the card balance to avoid such inconvenience regularly.

4. Be Smart On Applying The Appropriate Card For International Tours

All the credit cards will not carry International benefits.
Many Credit cards charge a fee when they are used overseas.
So when you’re planning for a trip outside the country, make sure to contact your credit card issuer and inquire about the foreign transaction fee they charge for that particular country.
If you own multiple credit cards from multiple banks, then remember to figure out the best fee-free card to safeguard your finances from unnecessary charges.
Be Smart When Shifting To A Different Credit Card
Generally, there are many credit card companies available to choose from.
Each of these companies offers various benefits and features, which differ from one company to another.
Thus, it is vital to choose one company wisely to cater to your needs.
But in case the chosen company fails to meet your needs, then it’s better to end the relationship and switch to a better credit card company.
Other than that, avoid making a habit of switching cards, as too much of shifting can reduce your credit score.

Tips for Picking a Credit Card

All credit cards have unique features, advantages, and drawbacks.
No two credit cards are the same.
Thus, when selecting a credit card, it must be managed wisely.
Decide which characteristics are essential for you, then do a little research to find the most suitable card out of the bunch.
The key point to consider before obtaining a credit card is whether you carry a balance in your other credit cards.
In that case, it would be more advantageous to look for a low-interest rate credit card to avoid high charges in the future.
But if you have a habit of clearing the entire balance at the end of every month, then you probably don’t have to bother much about the interest rate as it doesn’t matter you at all.
Finally, look for benefits and rewards each credit card company offers. Plus, make sure to read the agreement and understand the limitations before signing it.

The bottom line

The credit card industry earns millions of dollars through interest annually from people who have a propensity to fall into debt when using credit cards.
Thus, make sure to use your cards appropriately.
Read the agreement and know the limitations before using the card. Learn about the interest rate and extra fees you may have to pay.
Also, make sure to pay off the balance at the end of each month to avoid unnecessary interest charges.
Remember to check the credit card account regularly.
Whether the credit card is safe or harmful usually depends on how you are using it.
If you use the credit card recklessly, creating huge debt, then it is best to steer clear from credit cards.
But in case you use your credit card to develop your credit history securely and use it to utilize cardholder benefits then, credit cards are an excellent choice for you to improve your financial situation.
I expect this guide will assist you in using the credit cards intelligently and that you enjoy excellent rewards and privileges from your credit card issuer.



Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.


Jun Sing Tan

November 23, 2020