How to use a credit card wisely? Even though there is a credit card limit with every card, it is hard to keep a track of spending. The increasing percentage of interest and fees applicable on credit cards makes it all the more important to use a credit wisely. To use it in a way that the end amount you owe the bank does not exceed your budget and leaves you in debt as it piles on. For this very reason it is more advisable to use a debit card where one automatically tries to spend within the limit because the amount of money at his/her disposal through their account is limited. Following tips are recommended for managing a credit card:
Keep Single Credit Card
Starting from the basics and with what seems logical, always keep a single credit card. The more you have, the more you increase your spending. But that has to be repaid from somewhere along with interest. It also harder to keep a track of what is due where with multiple cards.
Define your Limits and Pay Monthly Bills on Time
Another wise idea would be to determine a spending limit on it for each month. Instead of using it for retail and shopping (in which case it is very easy to lose track of how much you have spent), use it for a gym subscription or Netflix etc. Anything that deducts only a given set amount every month that can easily be managed. Also, pay all off every month and do not just keep adding to the sum. If there is a sum you are finding difficult to pay off in a month then stop using the card till it is paid. Literally, tuck it away! This is the first thing to take care of when using a credit card, to pay the dues on time and avoid spending more till they are paid.
Each month the card owner is required to pay a 'minimum repayment'. The rest of the amount owed to the issuer keep growing with interest if it is not paid. To avoid this hefty sum that needs to be repaid, it is ideal to pay your balance in full instead of just the minimum repayment. Even if it is hard to pay in full, pay the maximum amount and not just the minimum repayment amount. Need to know more about how to use a credit card wisely?
Use Only in Emergency Situations
One way to use credit card wisely is to only use it for emergencies. Get a card but keep it for rainy days. Only use it if all other options are exhausted. But make sure to get a card that has minimal yearly fees too so that you do not pay high fees for a credit card you barely use.
Keep an Eye on Interest You Pay
Sometimes there are options given to a card owner if they are having trouble paying the amount for some time. The bank that has issued the card can offer you options to postpone the repayment while increasing the interest rates on it at the same time. NEVER go for such options as they only keep adding to the amount that you have to pay sooner or later. So, the best option is to steer clear of such deals altogether.
Avoid Penalty Fee
Apart from the interest, there may also be an additional 'penalty fee' for exceeding the late fee repayment deadline. This will further drag the card user in to debt with the never-ending increase in amount to be paid. So, the best option is to limit your card use to emergencies or to subscriptions so that a given amount is deducted each month only, and to pay off in full every month instead of letting it pile up.
These are some of the tips regarding how to use a credit card wisely. If you have more ideas for our readers, please share your thoughts in the comments. This article also covers similar queries on same topic as following:
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