How to be a smart credit card user

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All of us are enamoured by credit cards, this one-ticket wonder to the world full of amazing goodies and fantastic services. All that we could not afford before can now be purchased with a credit card. Sounds perfectly good, right? But with great things come great responsibilities and credit cards are no different. Responsibility, in this case, refers to the payment of the credit card bill, among other things.

Although credit cards open the doors to a whole new world, this new world does not come for free. In order to enjoy all the benefits that a credit card entails without facing repercussions such as exorbitant bills and high rate of interest, customers will have to be smart about their credit card usage. Fret not, for we will describe the ways in which one can be a smart credit card user. Given below are certain tips/tricks/words of advice that are generally provided by seasoned credit card providers and users. Utilising these pearls of wisdom, one can easily become a smart credit card user.

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– Stay within the budget

As much as this does not sound like fun, it is imperative for individuals to not go all out and spend their entire credit card limit on a shopping spree at Forever 21 or even Gucci (as tempting as that sounds!). This is because it can turn your financial planning into disaster. In other words, do not spend more than you can afford. It is a lot easier to believe that you can pay back the amount later, but a lot harder to actually do so. It is not very difficult to rack up a debt otherwise. Hence, although it is tempting to spend the hefty amount available on the card, staying on a strict budget and keeping track of the spends is rule number 1. Ideally, never spend your entire credit card limit in one go, ever!

– Pay bills on time

This may seem obvious but most individuals pay only the minimum balance and try to get away with that. That is a No! No! No!

Although it is convenient and you may not have to burden yourself, paying only the minimum will result in your falling into deep debt which might take a very long time to get out of. Instead, it is advisable to pay off the entire balance in one go. If that is not feasible, at least pay more than the minimum balance required. This way, extra charges can be avoided and all payments can be made on time.

– Change Credit Limit

In case you find it hard to curb your spending, ask your provider to reduce your credit limit. This way, spending is automatically limited and repayments are also a lot easier. Another word of caution is that, if you find it hard to repay your bill every month, do not increase your credit limit as this ensures that you’ll fall into debt a lot quicker. The only reason credit limit should be increased, is if there is a rise in your income and can afford to pay off all subsequent credit card bills.

– Avoid Cash Advances

Although cash advance is provided by almost all credit cards, it should not be used unless it is highly necessary. This is because the interest rate charged on cash advances are extremely high and is calculated from when the money is taken. Additionally, this interest is compounded until the entire amount is cleared. In case the payment is not made on time, additional interest is charged.

You can use this facility only in the case of an emergency. In case you require cash, withdrawing money from a debit card is recommended instead of using a credit card. In case the interest is not paid after availing a cash advance, there is high chance that you will incur further debt.

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– Reward Points and Offers

Almost all credit cards come with some kind of a Rewards Program or provide a number of offers at least. These offers can be with respect to lounge access at airports, lifestyle offers or even those related to dining and travel. Utilizing these offers will help enhance the credit card experience and a number of advantages can also be enjoyed. Reward Points usually expire after a certain amount of time, hence you must ensure that these points are used at the earliest and in the best possible way.

– Security

Almost every day we hear cases of one or another person being duped by fraudsters who utilise an individual’s bank details or credit card details. Being safe is similar to being smart. Never give out credit card details to strangers or individuals unless they are reputed. Additionally, there are also reports of certain petrol pumps duping customers and copying their credit card details to make illegal purchases. Banks and credit card providers do not call anyone to ask them for their card numbers, hence if anyone receives such a call, it should be ignored. Remember, it is always better to be safe rather than sorry.

In addition to the above tips, other points should be taken note of such as keeping an account open even if the card is paid off. This is because the credit score of an individual gets affected if a card is closed. Keeping an eye on the credit score and credit reports regularly is also advisable. Do not use credit cards to pay bills such as mortgages unless unavoidable. Opting for a balance transfer is also advisable occasionally.

Although credit cards come with a plethora of benefits, they need to be used cautiously and judiciously so as to get the best out of these plastic cards without resulting in your falling into a debt trap. Following the above tips and more will result in gaining the best out of credit cards. Additionally, each credit card provider comes with different benefits and features. When an individual procures a credit card, the pros and cons must be weighed and only then selected. Not all benefits of a certain card is necessary. Hence choosing according to your lifestyle and requirements is important.

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