Credit cards are a financial instrument that most people use but for different purposes because each one of us has different needs. And there are different cards in the market with different characteristics to attend the majority of the people. But credit cards can be a dangerous tool for the finances of the person if they are not well used.
That is why the cardholders should be careful when they use the credit card; they may not be able to pay the debt and have a poor credit record. But when credit cards are well used the person will be able to have benefits from it. In this article we are going to talk about tips and recommendations for the use of credit cards.
Tips for the correct use of credit cards
- Make sure that you pay your balance every month: If you use your credit card and you have a debt with the card provider (balance to pay) then you should pay it as soon as you can.
If you pay your balance every month you will be able to pay your debt quicker and pay fewer interests. Paying your balance every month will help you to build a good credit history because the financial institutions will know that you have the habit of paying your debt every month which is important for them.
- Pay your balance before it starts generating interests: With credit cards there is a date (the closing date) where the amount that you have spent with the card will start generating interests. If you pay the balance before that date you will be able to avoid paying interests which will allow you to save some money.
- Use the credit for what you need not for what you want: You should be smart when using credit or credit cards. Make sure that you are rational and not emotional because you are risking your credit history and credit score when you use your credit card.
That means that you taking the risk of having a higher rate and maybe a reject when you want to ask for credit if you don`t pay your balance on time. To avoid that you should manage your finances in a correct way. Make sure that you buy things that you need and have a reasonable price and not want you want.
- Make sure that you have the money ready for the payment of the month: If you don`t pay your balance on time you will start generating additional interests because of the late payment.
But you will also create a default history which is going to impact your credit history and credit score. So, you should have your finances in order to have the right amount of money to make the payment of the month.
However, those tips may not be enough to get the best out of your credit cards. There are many opportunities in the market and you can look for them and take advantage from it. Let`s see other tips that are useful not only for the use of the credit cards but for the process of selecting your card
Things to consider about a credit card
- Try to get a lower interest rate: If you have a credit card and use it frequently try calling your card provider and ask for a reduction in your interest rate. Tell them that you have been a customer for a long time (if it is true) and that you want a lower rate.
That will allow you to pay fewer interests and save some money; but don`t take that lower rate as an opportunity to spend more because you should be careful with your finances, remember that you will have to pay for it later.
- If you have many credit cards eliminate the ones that are not good for you: Make a list with the characteristics of each credit card that you have and compare what each one of them offer to you.
Consider the interest rate, the rewards that your cards gives you, the fees (annual fee, late payment fee, foreign transaction fee and other) and the credit limit that you have. Eliminate those cards that are the worst in your list and keep the ones that offer the best for you.
- Look for new and better credit cards: As long as you use your credit cards correctly you are going to build a good credit history and have a good credit score which means that you are able to have better credit cards.
So, once you have eliminated those credit cards that are not great for you, you will be able to submit your application for a new credit card with lower interest rate, lower fees, higher credit limit or better rewards. Look for the card that fits on your needs.
- Focus on the long-term: Do not try to solve short term problems with your credit card and don`t get a credit card based on the short term. Think about what you want for your future (in financial terms) and choose the right cards based on that. Be smart with your expenses and look for opportunities with rewards cards. You can find some good options with those cards because there are rewards plans that let you win money from the use of the card.
In summary, you should be careful and rational when using your credit card. There are different options in the market, not only for credit cards, you can find prepaid and debit cards with a good set of benefits. If you want to know more about it feel free to read more about it and do a research before taking a decision.