A Credit card has made purchasing goods and services extremely convenient – No carrying huge wads of cash! Besides, incentives like cash back, air miles, loyalty points and so forth are added advantages. Interest-free benefit for the short term and buying expensive items with the help of instalments make a credit card a must-have. Smart use of Credit Cards can help improve your credit score, thereby making it easier to get a loan.
Credit card bills may be alarming especially if you have made purchases, which are beyond your repayment capacity and income. Not paying your bills on time, part payment, and defaulting on payment will lead to more credit in the form of late fees and interest.
Uncontrolled spending can submerge you deep in debt. Besides, it may negatively impact your credit score which in turn may affect future borrowings.
Knowing the terms and conditions beforehand will familiarize you with your card. It will familiarize you with the credit limit, interest charges, minimum amount due, and so forth.
Never store your PIN with your card. It is advisable not to give your card to anyone else. Ensure that your PIN should not be an easy guess for others. If you feel someone has seen your PIN, change it.
You will certainly not spend cash unnecessarily because you know your spending limits every month. Likewise, considering your card as cash will help you strike a balance between expenses and income.
Your card can help you maintain a good credit score. Your credit report contains every detail related to your credit activity, reflecting your creditworthiness. It also reflects outstanding loans or if you have defaulted on a payment. If you apply for a loan in the future, lenders will check your borrowing and repayment history to calculate your repayment capacity. If you fail to make payments on time, it will reflect on your credit report and lenders will not risk approving your loan.
Spend according to your income. Avoid expenses that go beyond your income limits. Overspending may lead to financial troubles and even bankruptcy.
Always keep track of your spending. Never exceed your credit limit. It is easy to spend but difficult to pay if the spending exceeds your ability to pay. Hence, opt for controlled spending. In addition, keep a check on your credit card statement to ensure there is no discrepancy. Maintaining a list of your expenses and keeping receipts pertaining to your card can help you find any mismatch. If you find any discrepancy in the bill statement, report it immediately to your lender.
Late payment fees on credit card bills are generally high. If you fail to pay your bills on time, lenders will add the late payment fee in your next bill. This late fee may also include other surcharges. Hence, pay your bills on or before the payment due date. Additionally, ensure that the payment reaches the lender on time. For example, if you pay by cheque on the due date, it will be credited usually in 2-3 working days. Your effort to pay on time will fail and you will end up paying late fees.
If you fail to completely pay the full bill amount, you will be charged interest on your card. Paying only the minimum amount due every month or failing to make successive payments over time can lead to a huge financial burden. You may end up paying more than double or triple the amount you owe, Hence, make it a point to always pay your bills in full and on time.
Wants and necessities are two different things. Wants may be unlimited but necessities are limited. Distinguishing between what you want from what you need can help you curb unnecessary expenditure. Refrain from impulse buying so that you do not regret later.
Guard your card against credit card fraud. If you are using it at the food counter or a fashion outlet, ensure that the transaction on your card is done in your presence. Cross check if the card returned to you after the transaction is indeed yours. Additionally, check that it has not been tampered with in any way. When making online payments, ensure that the payment gateway is safe and the details you enter aren’t stored on your web browser.
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