In today’s society it is sometimes hard not to have a credit card at all. There may be times when you have emergencies and not the cash. Possessing a credit card does not necessarily mean to jeopardize your financial health. All you have to do is to know how to use them to your benefit and not to the benefit of your credit card lender. Here are 10 basic principles you need to understand to your credit card responsibly.
1. Remember that your credit limit is not your income.
People tend to feel like they’re flying when their banks offer them a high credit limit. You need to understand that the higher the credit limit, the bigger your responsibility to keep you and your family financially healthy. The credit limit is not your income. Eventually you have to pay back every penny you used with the interest.
2. Avoid Annual Fees
There are lifetime free credit cards that don’t charge you any annual fees. As much as possible, try avoiding paying these annual fees. You can either call your credit card lender and negotiate this or switch to a free annual fees credit card.
3. Avoid Priced Upgrades
Your credit card lender will offer you to upgrade your card to Platinum or Titanium all the time. Usually they charge you a one time fee for that or annual fee. When this happens, insist on free conversions.
4. Avoid Cash Withdrawals
Cash withdrawals are very expensive because they will charge you a transaction fee. Additionally, you will have to pay interest from the date that you withdraw cash, regardless of whether you pay in full or not.
5. Avoid Revolving Credit
Revolving credit means paying outstanding balance only in installments according to your convenience and therefore attracting interest on the balance after your partial payment.
6. Pay more than the Minimum Amount Due
Paying only the minimum amount will get you into an endless cycle of revolving credit. This will become worse and worse and you will have to pay for so much more than you originally bargained for.
7. Pay Your Dues Regularly
Never forget to make any payment no matter what. Even if your finances for one month stresses you out more than usual, try not to skip payments but pay at least the minimum due for that month. If you are out of town or for some reason will not be able to personally make payments, talk to your bank and arrange with them to make the payments automatically.
8. Time Your Shopping
By timing your major shopping 2-3 days before the monthly statement dates of your accounts, you can enjoy a maximum free credit period of 45-50 days.
9. Credit Card Loans
Credit card loans usually have a low fixed rate interest. If you use credit card loans to buy a car, it will cost you less than if you take out a normal automobile loan.
10. Co-Branded Cards
There are service providers that work together with banks to offer co-branded credit cards. Consider taking these offers especially if it is the service provider that you use frequently.
By keeping these 10 principles, you will make your credit cards work for your benefit only.
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