Scary, troubling and plainly put, evil. That’s the way a lot of people describe credit cards and credit in general. But, did you know that a credit card can help you finance certain things you need without hurting your personal finances? Also, they can help you increase your credit score.
It’s all about knowing how to use them, take advantage of it’s benefits and always paying what you owe. Oh! And discipline. One of the biggest mistakes you can make is thinking –even if you don’t do it consciously– that a credit card is an extension of your income. It is not. But it is a good way to finance certain personal needs.
Let’s say you need to buy some supplies for your brand new bakery business but you don’t have enough cash, yet, you have a plan to have that money in a couple of weeks. You can buy what you need with a credit card and pay it off entirely once you get the money and, as long as you don’t pay it after your due date, you won’t have to pay interest. Cool, right?
But before you run off to get a credit card, there are some things you need to know to take the best advantage of them.
- Research. Then, do some more researching. Every bank has its own credit programs, plans, interest rates and benefits so it’s crucial that you have all the information on every single one so you can choose one that fits your needs.
- Compare interest rates. Some credit cards can be a little expensive to have and you could get choked on the ever rising interests.
- Know your dates. There are two important dates that you need to remember: your Payment Due Date, that tells you the last day you have to pay it; and your Closing Date, that marks the last day of the monthly period of the bank for your account.
- Pay off your debt. This is just a matter of knowing how much you earn, how much money you have after fixed payments and savings and how much can you spare to pay off in debt. By the way, you shouldn’t have to pay more than 30% of your income in debt.
So, if you find a credit card that meets your needs and you are completely sure you can pay it without forgetting your dates and hurting your personal finances, go for it.
Here are some advices for you to become a better credit card user:
- Buy what you need, not what you want. Yes, there’s a difference and you need to learn to distinguish them.
- Forget about paying interests. If you pay your credit card entirely before your next Closing Date, you won’t be charged for interests. But if you only pay the minimum credit card payment, you will be charged with interests for the full balance.
- Big debt, low cost? Although a big debt is not an ideal scenario, always make sure that you have it in the lowest interest rate. That way you won’t drown in them.
- Take advantage of the rewards. If you are getting a credit card, learn all you can about its rewards program. You may accumulate points to buy airline tickets, stuff for your house or even benefits and discounts in stores.
- Not more than three credit cards. It’s not about how much you can pay but how much you can remember. Credit cards have their fare share of administrative work like due dates, closing dates, balances and credit reports. If you have more than three, including the department store ones, you’ll eventually slip and forget something.
Always remember that a credit card is a tool to grow, not an income extension and definitely not a way for you to have all the pretty things you could possibly want. Be responsible and your credit score will talk wonders about you. What would you say is the most difficult thing about having a credit card?