There is no doubt that credit card is an immense boon for the common men now who are struggling to patch their financial gaps. By giving individuals their much-needed breathing space in terms of emergency expenses, credit card shares the burden for those who can intelligently and effectively use this privilege.
On the other hand, a credit card is a bane too for those who are financially disciplined and are not bothered about the adverse consequences of overspending using credit cards. If this is the case, then credit cards may quickly turn away from being a great financial safety to something which can give you immense grief overtime on not used wisely.
Here, you can find 5 essential usage rules for credit cards everyone may try to stick to. These rules will allow you to reap the best benefits of using credit cards alongside safeguarding you from the adverse impacts of improper use of credit cards.
1. Don’t sing up for all random credit cards available to you.
If you already have a credit card and maintaining a fair credit score, then there are chances that you will be getting offers of many pre-approved credit cards through the mail and sales calls. This doesn’t mean that you have to take all those for granted and sing up for them.
At the first point, assess your actual need for another credit card. Only if your extremely in need, think of second credit cards and on planning this, do careful consideration of the available options to find the adequate choice for you. The major factors to consider are the APR percentage, annual fee, initial interest-free period offers, late payment penalties, credit limit, and add-on charged in any.
Always keep in mind that signing up for multiple credit cards is not only a way to increase your financial debts, but it may also negatively affect your credit score if not managed properly.
2. Always keep the outstanding balance at a bare minimum.
While using credit cards, you know that a credit card issuer may first give you a few days to pay it off interest-free. If you can pay off the balance within this period, you don’t have to pay any additional interest on the amount. The benefit is that you can rotate your funds for a few days if you are a business person or so. For working professionals also it is advantageous to meet up any financial needs during the second half of a month with a credit card payment to be paid off at the next salary date.
However, this interest-free payback will only work out if you can repay with the stipulated time period. If you accrue an outstanding balance over and above this time frame, the interest will start to accumulate quickly based on the APR calculations. If you consistently tend to default the credit card payments, then it can go out of your hand very soon, and you will fall into unmanageable debts. So always ensure that the usage of the card is limited in the way it can be used.
3. Avoid bare minimum payment habits.
Making minimum monthly payments only can put into credit card perils very soon. Say for example, if you spent about 2000 dollars using your credit card, and your credit card statement may instruct to pay off 2% of the outstanding balance only at a minimum, then the payment is of just $40. However, if your issuer charges you at a 20% APR, then a monthly interest charge of about 1.6% could be applied on to the left out $1,960. This is about $32.
So, even when you think you paid off $40 as a minimum monthly payment of out $2000, in effect you have made a repayment of only $8. If you keep on with this trend, then you will ultimately end up in paying about $8,960 over a time period of 30 years, to pay off the actual $2,000 you availed from the provider. So, don’t just stick to the minimum payment only, but always ensure that you keep your balance close to $0 to as minimal as possible.
4. Never miss the payment deadline.
One of the prime rules any credit card user should follow is to make the payment on time, each time. Even though people want to pay off their pending debts on time, there are many who forget to do it. In fact, missing a deadline even for a day or two can cost you big as the latest fee along with the quick increment APR calculations may put a big burden on you on defaulting credit card payments.
If you have multiple credit cards and find it a difficult deal to keep up with the deadlines of each, it is ideal to set some reminders on your smartphones or use the mobile applications of the credit card companies to set payment alerts. There are many online options now to send a reminder, and even you can set auto-payments of credit card bills from your checking out as preset.
5. Keep a close track of credit card statements.
For many users, it is not uncommon that they spot erroneous transactions also on their statements. Sometimes, some purchases may have been billed multiple times on your card or any other faulty transactions getting recorded in your statement, which you may never know without checking your credit card statements frequently.
Also, if you are making some recurring payments through online pre-set payment methods, you may forget what charges get accrue on the credit card statement each month without checking the statements. So, try to take at least a check monthly by accessing your credit card statements, which can be now accessed easily through online platforms. On finding any discrepancies in your credit statement, approach the provider or the credit agencies to get appropriate solutions.
Along with all these, it is also important to immediately report if your credit card is lost or stolen. Without getting it blocked immediately, you will stand responsible for any illegal transactions made through your credit cards. Keep the provider hotline number always handy with you or access the internet-based facility to block the credit card.