How to use your credit cards effectively: 6 tips

It goes without saying that credit cards are useful for monetary transactions in this cashless society. Credit cards meet the needs of different people in different ways. It is thus important to choose the right card and use it effectively so as not to fall into a debt trap.

Below are some tips to help you use your card to your maximum advantage.

1. Interest free period

A card that offers interest free charges for longer, or one that has lower interest on purchases will suit a consumer who needs extra time in paying for his or her purchases every month. If you know that you can’t pay your balance on time, look for a card that offers a longer interest free duration.  Some banks offer no interest for up to 6 months or more, so this may be a good offer to take advantage of as long as you don’t overlook the date the interest rate charges commence.

Credit card management

2. Be aware of annual fees

If you are planning to use your credit card for basic needs such as making rare online transactions and as an emergency backup paying for an annual fee will not be worthwhile. However, if you are a frequent user of the credit card and are after the rewards programs or redeeming your points for purchases, then the annual fee may be worth paying for.

3. Stick to the minimum credit limit

It won’t always be a good idea to increase the credit limit of your card if this is offered by your bank.  By sticking to the minimum credit limit, you can be assured of not being lured by the temptation to overspend. Also, trying not to get too close to your credit limit is a good way of restraining yourself from unnecessary spending. Spend within your budget and only spend on what is necessary.

4. Avoid frequent card switching

Some people tend to switch from card to card with the aim of saving money with balance transfer rates. Though this may sound practical, if you fail to pay the required amount on time, or to switch card again before the interest rate goes up, it may end up damaging your credit.

Some banks offer a grace period of 6 months before a balance fee applies. Failing to pay up by the stipulated time will result in having to fork out unnecessary expenses. In addition, credit card companies charge a balance transfer fee so that they make some money from credit card switchers. Alternatively, you can call your bank to ask them to match the offer before switching to another bank that offers credit cards with a lower interest rate.

5. Track your credit card expenses

Keep your receipts in a safe place so you can keep track of your monthly expenses. By doing this, you can check yourself from making an impulsive purchase knowing how much you have already spent in a particular month. A debtor’s worse nightmare is spending beyond his or her budget or maxing out on the credit card, hence escalating his or her debt.

6. Pay in full

Banks require their credit card customers to pay at least the minimum charge each month.  Making only the bare minimum payments may cost you more money due to the interest mounting up. It is advisable to use your credit card to pay for items you can afford to pay in full in each to avoid the debt trap.

Credit cards can be an advantage if you can use them effectively. Look at the above tips to ensure that you are getting the most out of your credit card.

Image by Andres Rueda

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