There are various financial instruments provided by banks and other institutions which help us in managing our personal financial needs in a better way. Credit Card is one such popular financial instrument which is being widely used by the people around the world.
Credit Card provides the user with a definite sum of prefixed limit. The user can use the credit card for various purposes by either swapping the card or withdrawing cash through the card.
In return for these services, the bank charges interest on the amount used and other related charges are also applicable.
The user is given the facility to repay the amount used periodically after a definite period, referred to as the billing cycle which is usually once a month.
Credit Card has a validity period linked to it between which it can be used. The Credit Card acquires an expiry status beyond this validity period, and then it cannot be used in any way. So this briefly describes the working of Credit Card.
The point of discussion in this post is the usage of Credit Card. How to use your Credit Card to your advantage?
Two streams of discussion come up. First, Bad Credit Card Habits. And the second is to be a responsible Credit Card user.
We will discuss both of these points of views. As both these lines of discussion are supplementary to each other as such, both are equally important from the point of view of the user of the Credit Card.
If a user follows both of these lines, he or she can reap multiple benefits from the usage of Credit Card.
Don’t Misuse Credit Card
With respect to this line of discussion, two factors should always be kept in mind.
One is that every Credit Card has a fixed limit to it. This means that you can use only the amount to that limit which has been allocated to you.
And the another important factor is the Interest charged on the amount being used on the Credit Card. So as an intelligent user one must avoid misuse of credit card. Misuse of credit card reduces your effective credit limit.
So if you keep on shopping for whatever comes in your mind or for whatever you like then actually you are reducing your credit limit and simultaneously increasing your payout on your credit card bill.
Also if you continue to follow this habit of yours, then you may not be left with any amount in your credit card, and if any vital situation or emergency arises, you may even fall short of funds.
So one must avoid or reduce the misuse of Credit Card.
Excessive shopping, bulk purchases, swapping high amounts, cash withdrawals and frequent use for day to day expenses must be certainly avoided.
We will not be going into the mathematics of interests and charges linked to Credit Cards as they vary from bank to bank, but one thing is certain that by this misuse you will increase your credit card bill by many times.
Even when you pay the minimum amount on your credit card bill, interest and other charges still continue to pile on rest of the amount left on the bill.
There are critical times when one is not in a position to pay the bills, then in that situation if your credit card bill is kept in control, you will never face a problematic situation.
Avoiding misuse always keeps a good balance in your card which you can utilize in times of emergency or for the execution of other important tasks.
Avoid These Bad Credit Card Habits
Make sure not to fall into the trap of these bad credit card habits.
Not Reading your Credit Card Statements
Don’t fall into the trap of not reading your credit card statements. Although you might be receiving various bills in your mail (or email), make sure not to miss out reading your credit card bill.
Some credit card users think it is boring as well as time-consuming to go through your credit card bill. However, there are benefits of reading a credit card statement.
By going through credit card statement, you can come to know any billing errors or unauthorized credit card charges.
So, you should always check your credit card statement thoroughly so as to know your account activity.
Making purchases without knowing your available credit limit
Before making a purchase always be sure of the available credit limit. It might happen, that you had checked for the credit limit quite some time back.
In the meantime, it may happen that you had made a purchase, or it is also possible that the credit card limit has been lowered. In either of the case, you are not sure of the available credit limit on your credit card account.
So, just take the help of customer support and confirm the limit on your credit card before going for purchase.
Using Credit Card instead of your Debit Card
Don’t fall into the trap of using a credit card instead of Debit card. Ideally, you should be using credit cards to rack up rewards or when you are short of funds.
For everyday purchases like groceries, clothing, and other expenses, always prefer a debit card. If you are using your credit card, you must make a concrete plan for paying off whatever amount you have used on your credit card.
Paying Only The Minimum Amount Due
It’s always easier to pay out the minimum amount due on your credit card. However, it’s a bad habit of paying only the minimum amount due on your credit card.
It is because, when you pay the minimum amount due on your credit card, you end up attracting financial charges and other interests on your next credit card bill.
So, effectively you are not making any attempt to increase your balance on your credit card limit. Rather, you are only paying financial charges and interests.
Making your Credit Card Payments Late
It’s a bad habit if you constantly forget to make your credit card payments on time. If you are habitually making late payments on your credit card bill, you are doing no good to yourself.
It attracts late charges and other financial charges on your credit card bill. So money that should have gone towards paying off your used money on your credit card is just spent is paying off financial charges and interests.
It is always advisable to make a system whereby you can easily remember to make your credit card payments on time rather than end up making late payments.
Be Responsible Credit Card User
A responsible credit card user knows how to use it smartly enough to make it a financing instrument that can be of help in times when you require the most and not as a means of wasting the precious monetary resource purely for fun, entertainment or spontaneous purchases.
A Responsible credit card user always keeps the bill under control, meaning whatever bill arises is cleared in that month only.
So, on one hand, he saves on the various charges and interests and the other he improves the credit scores and his credit ranking.
A responsible credit card user also avoids withdrawing cash from the card as high interests are levied on such withdrawals. And if any purchase of high amount is required to be made, then it is executed in the form of installments so that effective credit limit is always kept intact and on the higher level near the original credit limit.
Also, a responsible credit card user does not take too many cards as it may be difficult to manage, and also there are chances of extra and unnecessary spending.
Habits of Responsible Credit Card Users
Here, we list out the habits of highly responsible credit card users.
Paying Off Your Credit Card Dues In Full Every Month
It is one of the essential habits of a responsible credit card user. As a responsible credit card user, you should always pay off your credit card bill in full every month.
It not only helps to revive your credit card limit, but you can also earn extra reward points. However, your payment should be on time and should not be late.
Limit Spending on Credit Cards
Responsible Credit Card Users update digital budgets and go on to write goals in their wallets before making any spending on their Credit Cards.
There is no hasty spending on their credit cards. Rather they use debit cards for making a daily purchase and keep credit cards for emergency purchases for redeeming rewards on purchases or for cash back.
Use Auto Pay Facility
Responsible Credit Card Users use the facility of Auto Pay – an automatic payment system – for paying their credit card bills. Usually, it happens that you may miss your credit card payment or it may happen that your payment goes late.
However, by signing auto pay facility you make sure that the credit card payments are always on time. Simply ensure that you have the balance in your bank account.
So it is always better and in the personal interest to manage your credit card so that they can be a helping hand to you. If you follow this golden principle of “Bad Credit Card Habits” you will always be in control of your credit card usage and thus always have a healthy credit limit on your credit card which you can use when you require the most.