There is a myth associated with credit cards. It is believed to be a financing tool that, instead of aiding its users, increases their spending habits and leads them to be under debt. But if used in the correct manner, without being under a debt, credit cards can prove to be very useful in many ways.
It helps the users to build a strong credit profile which comes very useful when opting for a loan. These cards also provide the user with various cashback, discounts and promotional offers across different transactions, saving them some money. Proper usage of a credit card depends on responsible spending and regular settling of the monthly bills. Click here to know more about how to use a credit card, here is a list of 5 simple suggestions to use your credit card, debt-free.
Credit card usage: best practices
- Ensure timely settlement of dues: Credit Card users should follow this basic rule of ensuring timely payment of their dues as it provides an increase in their credit score. Individuals should always try to keep a minimal or no balance that is left to be settled to the company. When the monthly bills are settled on the given time, users remain debt-free and enjoy paying zero interest on their credit amount.
- All the benefits provided by a credit card can only be availed if the dues are settled in time. If left unpaid, the outstanding balance is charged along with high-interest rates, leading the user to be under debt.
- Keep a tab on your monthly spending: One of the most healthy ways of being a debt-free credit card user is to keep a check on the monthly expenditure limit. Users should always spend, keeping in mind their monthly credit limit to avoid getting into any form of debt.
- Thereby, it is always advisable to have a thorough look at credit card statements. It ensures that the card owners are alert about their monthly expenses and it also saves from paying additional charges in the form of debts and interests from the card companies.
- Don’t use Credit cards to withdraw cash: People can always face a monetary crisis as it is an unexpected event. Under such circumstances, using a credit or withdrawing cash from them is not a good move. It might be useful at such times, but, over time, users end up under even more debt.
- The credit card companies charge a high amount of interest over such transactions at the time of their repayment. Lastly, users don’t get grace period when cash advance options are used; it might make the user end up in great debt.
- Try to repay more than the minimum bill amount: One of the greatest traps that lead people into debt of the credit card companies is the minimum payment option they provide. The user finds paying a minimum amount on their bill as a feasible option. However, they forget that they are repaying a part of the total monthly settlement and not the complete settlement. This trap sets the user to repay the money at even higher interest rates over the course of time.
- However, one can avoid this trap by setting the total amount of the bill every month and enjoy the offers provided by the companies.
- Avoid having a lot of credit cards: Users of a card who pay their monthly bills on time and achieve a high credit score often receive pre-approved credit card offers. This tempting offer might become the reason for them being under debt.
Thereby, it is always suggested that one should first increase their source of income before opting for multiple credit cards. Moreover, vital factors must still be considered before signing up for credit cards. The users should always prevent increasing their creditor base to avoid a negative affect the credit score and be debt-free.
Credit cards also offer their users with options to transfer their credit balance between banks. Although the amount of money being transferred is subjected to interest rates, this feature can be essential at the time of settling off dues to be debt-free. Credit cards are preferred for the people who don’t cross their monthly spending limits and pay the monthly bill in time, preferably in full and not opt for minimum bill amount.