Categorized | Living

Use your credit cards wisely

Posted on 25 September 2009 by .

The life of a common man has changed completely with the advent of plastic money, especially the youth section of the society. They flaunt their cards and use it injudiciously without even knowing the repercussions.

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For many people, managing a credit card is harder than getting one. Currently, threatened by the global financial crisis banks are changing credit limits, doing away with interest free periods and charging higher interest rates on the credit borrowed.

Here are certain tips that must be kept in mind:

1. Understand that any time you use a credit card, you are borrowing money.

If you don’t pay off your balance each month, interest will be added to the total amount you owe.

2. Think before getting your first credit card.

Think very carefully before you decide to get your first credit card. Do you really need a credit card or would another option work just as well? Some other options to think about:

  • Getting a debit card, which is connected to your checking or savings account rather than borrowing money for each transaction.
  • Consider sharing a card with your parents and asking them to help you stay on track.
  • Wait and see. Just put off the decision for six months or a year and see how well you might Canadian-dollars_qdo without a credit card.

3. Choose wisely

 When selecting a credit card, you should shop around for the best deal. Compare different cards based on your own situation. Look for the following:

  • A low annual percentage rate (APR). The lower the rate, the less interest you have to pay. Watch out for low introductory rates that are raised after a year or less.
  • The interest calculation method. This affects how much interest you pay, even when the APR is identical.
  • Low or no annual fees. If the issuer charges an annual fee, ask them to waive it.
  • All other charges (i.e., late payment fees, transaction fees, over the limit fees, etc). These can really add to the total cost of your charges.
  • A grace period. Some credit cards charge interest from the day that the charges appear on your account. Other cards offer a grace period for you to pay off your balance before interest charges begin to accrue.
  • The credit limit. Keep your credit limit low (think about $500 or less), to make sure you don’t get in over your head.
  • Wide acceptance. A major credit card is convenient, and easier to manage.
  • Services and features, such as cash rebates, frequent flyer miles, extended warrantees, etc. Think carefully about the true cost of these programs when you consider interest and other charges.

4. Profit from your credit card

Credit cards can be useful when you make a profit out of it! Now, how is that possible? Well, it all depends on the kind of card you purchase, its best to opt for a lifetime free credit card that does not have an annual fee attached.

  • Also get a card that matches your lifestyle. If you shop a lot, see that your card offers a lot of discounts and cash back rewards for the all the shopping you do with a card.
  • If your job allows you to make frequent trips, get a card that gives you several travel friendly schemes on eating out, hotel stays and airline ticket discounts.

5. Minimum Payment Due

The date for the minimum payment due allows you to pay up a small amount upfront and this is usually in place to protect your credit score.

However, as a practice ensure that you pay the total amount due before the minimum payment due date to maintain an impeccable credit score else you will be levied interest on the balance amount pending if you continue to pay the actual amount due in full only after this due date.

If you fail to pay even the minimum amount due you will incur a late payment fee as well. 

6. Limit the number of cards you get.

It will be easier to keep track of your spending.

7. Track your spending.

  • Waiting until your statement arrives once a month to think about your balance can get you into trouble quickly.
  • Check your account online frequently.
  • Save receipts.
  • Maintain a ledger.
  • Consider signing up for balance notices and billing statement notifications from your credit card provider.

8. For each of your cards, keep a record of the following in case your card is lost or stolen.

Keep a photocopy of the front and back of your card in a safe place at home.

  • Account number
  • Issuer’s name
  • Phone number

The bottom line: Don’t spend more than you can afford to pay on a monthly basis. Wise use of your credit cards will help you establish a solid credit rating and avoid financial problems.

Priyunk_agarwal   Author: Priyunk Agarwal

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