Cards provide an excellent alternative when you do not have adequate cash. However, there are many situations when users overspend and fall in a debt trap. It is, therefore, important to use the card responsibly.
Before discussing how to use cards wisely, understanding these products will be beneficial. Also known as plastic money, these cards are a type of debt instrument that provides a revolving line of credit that may be used as required.
A major difference between credit and debit cards is that with the latter you may spend only what is available in your bank account. Even though credit cards entail risks, when used responsibly, these cards help improve your credit score as well as your financial management.
Here are four ways to use your cards responsibly.
1.Make smart purchase decisions
You may use your card for making everyday purchases like groceries, paying phone and utility bills or buying expensive products. However, you must pay for all the purchases you make using your card on or before the due date. Therefore, buying only what is necessary and affordable will prevent you from falling into a debt trap.
2.Refrain from making part payments
When you have a huge outstanding balance on your card, you may pay only the minimum amount. However, this only defers the payment to a later date. Furthermore, paying the minimum due results in increasing the interest on the unpaid balance amount. This may significantly impact your financial situation. Therefore, you must pay the entire bill amount before the due date.
3.Inform the card provider in case of delays
Making a timely payment on the credit card bill is important. However, during a particular month, there is a possibility that you will be unable to pay the bill on time. In such instances, it is recommended that you inform your card provider in advance about the delay. By doing so, your service provider may waive off late payment penalties.
4.Review your monthly bill
You must not always assume that everything on the card statement is accurately calculated. Experts recommend reviewing each item on the bill thoroughly to ensure its accuracy. You must also check the date on which your last payment was credited to ensure there are no incorrect delay and finance charges levied in the bill. Moreover, you must check there are no unauthorized transactions reflecting on the card statement. If you find any errors or discrepancies, you must immediately inform your card provider and rectify the same.
There are several benefits of a credit card when used wisely. These not only help you make purchases in case of insufficient cash but also assist you in developing your credit history. Timely payment of the bill and staying within the available credit limit reflects positively on your credit score. A higher credit score helps you avail of other loans like home or auto loans at favorable interest rates in the future.
However, before you choose a card, you must determine your credit card eligibility on the service provider’s website. This will help you to understand your credit limit as well as know the terms and conditions associated with the card. You must use your card wisely to avoid facing difficulties in the long run.