Credit cards are really useful, but you need to learn how to use them properly in order not to destroy your credit score. We haven’t learned this at school because our school system online teaches us how to take tests and doesn’t teach us things like how to do our taxes and use a credit card, which will be helpful in our adult life. So, without further ado, let’s dive into this blog and learn some useful tips for using your credit cards.
1. Choose the card that fits your needs
First and foremost, choose a credit card that perfectly suits your needs… not your credit limit aspirations. That way, you significantly reduce the risk of ending up in debt beyond your ability to repay.
Many financial institutions and countless businesses offer credit cards. It’s a matter of making a wise choice based on your income, the number of dependents you have, your spending habits, etc. Also, make sure you are well informed about the interest rates and conditions of use imposed by different cards.
In this regard, avoid being seduced by gifts or promotions from various businesses in exchange for signing up for their credit cards. These cards generally have much higher interest rates than those offered by financial institutions.
2. Keep your files in check
When you pay for your purchases with a credit card, the good habit of paying back the total amount borrowed on each payment date will help you build a good credit record by ensuring an excellent credit rating. This is a significant advantage when it comes to borrowing larger amounts, such as purchasing a home.
A credit rating is the equivalent of the score that credit bureaus give you based on your repayment habits. The more you pay back your loans on time and on schedule, the better your credit rating.
It goes without saying that a good credit rating gives you a good reputation in the eyes of financial institutions, while a bad rating could seriously harm you in many ways. For example, a financial institution could deny you an important loan that you need.
3. Avoid unnecessary interest
Of course, no one can plan for everything; there are always unexpected expenses in life. A credit card is an excellent way to deal with these minor emergencies right away, as long as you pay off the balance in full on or before the due date.
This way, you minimize the interest charges on your transactions and save money simultaneously. That said, saving and building a personal emergency fund is still a much better tool than a credit card for dealing with unexpected expenses.
4. Are you using the right credit card?
In addition to being a good tool for building your financial reputation, a credit card is a handy, if not indispensable, tool when it comes to renting a car or booking a hotel room and show tickets.
However, you should not use it to pay for impulse purchases on a regular basis to protect yourself from your own emotions. When you feel the urge to do so, ask yourself, “Would I buy this item if I had to pay cash?
Also, remember that the same rule applies to paying your card balance: pay it in full when your statement is due.
5. Keep track of your purchases
Another useful habit is to keep track of your purchases throughout the month. You can do this using your bank’s app connected to your checking account or another app that helps you manage your personal finances.
Avoid using the card until you pay off the balance when you see that you are about to reach your credit limit.
6. Don’t apply for credit you don’t need.
After reading the previous points, make sure you are in an excellent financial position to apply for a credit card and ask yourself if you really need it. If you’re not completely sure you can make regular payments, you can consider other financial options, such as a personal loan.
And, of course, encourage yourself to use another type of card to help you stay out of debt, budget, and spend only what you can afford.
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