Credit cards can be a significantly helpful financial tool. However, many credit card holders have trouble using a credit card effectively and wisely. So if you plan to apply for one, do your best so you won’t end up like others who get into financial troubles over credit card use.
To help you with that, we’re explaining the importance, proper usage, pros and cons, and types of credit cards. We’ll also have a look at how to pick the right credit card for your financial needs, how to handle credit card debt, and ways you can save money through your credit card.
Types of Credit Cards
Most people don’t know that there are many types of credit cards. They’re only familiar with one: the unsecured credit card, which doesn’t need collateral. Then there’s the secured credit card, which requires collateral.
Usage-wise, other than the collateral, there is virtually no difference between the two. Unsecured credit cards, however, require a good credit score before a credit card provider, usually a bank, issues you one. If your unsecured credit card application gets denied but you need a credit card, a secured one is your best bet.
Choosing a Credit Card
When choosing a credit card, review its terms, conditions, and fees, and compare them with those from the same and different issuers. This ensures you won’t be stuck with a card whose terms and conditions don’t fit your financial situation.
Also, consider rewards and cashback schemes that come with a particular credit card. You can maximize the credit card perks by matching it with your spending habits.
Maximizing the Benefits
Strategic credit card use has several benefits. You can maximize benefits and cashback to have a smaller credit card bill. You can also automate payment for utilities to ensure you don’t miss out on your bills. Lastly, you can use your credit card to purchase items, especially high-priced ones, and pay for them on an installment basis. There are many 0% interest offers, which you can avail of to spend less and make the purchase more manageable.
Managing Credit Card Debt
It’s easy to incur credit card debt, so you have to adopt responsible credit card debt management practices to avoid a debt trap.
First, much like with a moneylender, it’s best to pay off your entire credit card bill every month. If it’s not possible at the moment, pay as much as you can, pay off high-interest credit card balances to lower borrowing costs, and try to minimize your credit card usage for next month.
You should also avoid hasty purchases and think twice before accepting promotional offers with interest rates, especially since you’ll be able to find 0% interest promotions if you shop around.
Also, avoid cash advances and credit card loans, and be mindful of your spending threshold. As for the Buy Now, Pay Later scheme, only avail of it if you’re certain that you’ll have money by the time the item is charged to your card.
Lastly, it helps to minimize your credit card debt in the first place. Set a budget and stick to it. Overpaying credit card bills might speed up debt payback. Know your credit card debt rights. Credit card firms must work with customers to create a financially reasonable payment plan.
Read also: How to Resolve Payment Disputes Online: Steps to Take if a Bill Is Incorrect
Credit Card Rewards and Bonuses
Credit cards can serve as a means of accruing rewards and incentives in exchange for consumer expenditures. These rewards depend on the card. It can be cashback, discount, or accumulated points—or even all of them, depending on what the reward is intended for. Some rewards are for a specific product or service, like travel or dining, while others are for certain brands. Because of how diverse rewards are, it helps to look for the card that has the right rewards for your lifestyle.
Conclusion
Credit cards are wonderful financial tools that allow you to manage money, make online purchases, pay for items via installment, and enjoy rewards. However, it’s easy to end up using them irresponsibly, so it’s important to adopt the steps and cultivate the discipline needed to use them wisely and in your favor.
Part of that is reading and understanding credit card terms, conditions, fees, and rewards; making good use of perks and privileges, paying your credit card bills in full and on time; and being wary of credit card loans, Buy Now, Pay Later, and other similar schemes.
