Do you want to know the smartest way to use a credit card? Nowadays, most people use credit cards when making purchases. Furthermore, if you want to get a good credit rating, owning a credit card is one of the best ways to achieve this goal. However, most people find it a challenge to use credit cards to their advantage. For instance, they end up getting huge debts due to failure to use credit card smartly. To prevent yourself from incurring huge debts when using your credit card, you should remember the following 10 tips.
1. Look for Credit Cards That Offer You the Best Deals
Before you apply for a credit card, you should research on the best reward programs that cards offer. For instance, some cards provide you with the opportunity to earn rewards whenever you purchase goods and use your card to pay for them. You can use the rewards in exchange for air miles, discounts on related goods and services or on air miles.
You only have to look for rewards programs that suit your lifestyle. For instance, if you love shopping, you should apply for credit cards that offer rewards that you can use to buy goods. On the other hand, if you love traveling, go for credit cards that provide rewards, which you can use to travel the world.
2. Use Your Credit Card to Pay for Large Purchases
It’s easy to get into credit card debt if you keep using it to pay for small items. If left unchecked, these small payment amounts can end up piling to large amounts of money. The best way to deal with this problem is to use your card to make big purchases.
Before you use your credit card, you should first save the money you intend to spend in cash first. You should then make the purchases using your credit card to enable you to get the rewards. Since you already have the money, you won’t have problems repaying it
3. Avoid Cards with Hidden Fees
According to the law, banks that issue credit cards should not hide any charges. However, some of them hide charges in the application form using legal language that you may not understand. Many credit cards have several hidden fees, which customers don’t know until it becomes a challenge to pay them.
Among the charges, you should look out for include transaction fees, overdraft protection fees and processing fees. Other cards will charge you a fee if you fail to make payments on the designated hour when the due date arrives. By looking out for these hidden fees, you can avoid making payments on unnecessary charges.
4. Check Your Spending
When spending using credit cards, most people find themselves overspending. To avoid these, you should ask your bank to lower your limit. Since they want to get their money back at the end of every month, they will most likely agree. Remember we all have different needs when it comes to spending money.
You can also your card until you reach your imposed limit. You should then store the card until the next month or until you settle the bill. It will enable you to settle the bill in full without any difficulties.
5. Limit the Number of Cards You Have
Another smartest way to use is a credit card is to have a number of cards that you can manage. However, you should keep in mind that there is no magic number of cards to have. if you’re a responsible individual, you should consider keeping a few cards. You shouldn’t try to max out your credit cards since it negatively affects your credit rating. Try to keep your balances around 30%-50% of your allowable expenditure in order to have good credit checks.
6. Make Sure Keep Your Accounts Open
Look for good credit cards and once you get them, ensure they are always open. When it comes to your credit score, you should remember that the credit line’s age constitutes 15%. If you have an old card, you should realize that it shows you’re financially stable, for example, if it shows that your payment history is good. in most instances, your account will stay on the credit report for a period of around seven years.
However, if they remain inactive for any period, they will lose their influence. According to the law, your bank should not charge you an inactivity fee if you fail to use your credit card. However, if not used, they can close your account. Instead of waiting for your account to be closed, you should keep it open and active. The best way is to try to use it at least a few times a year.
7. Think before You Transfer Money
As with any other business, credit card companies are always looking for more customers. One of the incentives they offer customers is a low-interest rate for a limited duration. Most of the reduced rates will last for around six months or one year after you transfer the money.
It’s the reason why you need to look at the Annual Percentage Rate (APR) since it’s going to affect you in the long run. Moreover, some banks will charge you for transferring your money. In most cases, they will charge a percentage of the amount if you’re transferring, which can be costly.
8. Look for Deals That Suit Your Needs
Make sure you look for deals that suit your lifestyle. For example, you don’t need to pay for privileges if you can avoid them. Banks are always looking for more customers and it’s the reason they keep offering special deals. For the best outcome, you should look for credit cards that don’t charge a yearly fee for using their cards. Shop around and get a card that suits your needs. When looking for the best credit card, you should consider factors such as low interest rates, no charge when applying for the card and reports to credit bureaus.
9. Log into Your Account and Know How Much you’ve Spent and the Amount Remaining
When using a credit card, it’s easier to know how much you’re spending. For instance, you didn’t have to keep receipts for things such as groceries or gas purchases. You only need to log into your account online and see how you’re spending your money.
By checking your account on a regular basis, you will be able to monitor your spending and reduce chances of overspending. In the event you find yourself overspending, you should store the card until you repay the amount.
10. Keep One Credit Card for Emergency Purchases
One of the best ideas is to keep one credit card for emergency purposes. That way, you can deal with any unexpected expenses without struggling. The only thing you need to do is any for emergencies and not frivolous purchases.
Smartest Way to Use a Credit Card
Credit cards are valuable tools if you use them wisely. However, if you use them irresponsibly, you can end up incurring huge debts, which you may not be able to repay. Moreover, you should only use your credit card to make purchases, which you can afford to pay in cash. It will prevent you from paying for items that are overpriced.