Credit cards, when used right, can be a godsend. They’re incredibly useful when travelling, they help build your credit score for future loans, and can be a source of relief whenever you’re in a money emergency (think hospitalizations, accidents etc.).
However, they’re also incredibly easy to misuse. And it doesn’t help that banks encourage us to use our credit cards whenever we shop, leading to uncontrolled spending.
In this post, we brought together 10 pointers on how to use your credit card wisely.
1. Understand How a Credit Card Should be Used
Many people make the mistake of thinking of credit cards as ‘free money,’ immediately using it on frivolous purchases. Credit cards are an easy way to get a loan to buy what you want and need. Like any loan, it has to be paid on time, otherwise it accrues interest.
2. Use Only the Cards you Need
Having one or two credit cards is fine—anything more is just showing off. Many people make the mistake of applying for as many credit cards as they can, treating them as status symbols. But credit cards aren’t free, you need to pay annual fees for each one you have (save for cards that offer no annual fees).
3. Place your Signature on your Card
You’ll be surprised at how many people forget to place their signatures on their credit card. This tiny detail just might save you a massive headache should your credit card fall into the wrong hands.
4. Record your Expenses
Be sure to keep your charge slips and receipts and compare them with the charges on your credit card bill. Not only will this help when creating a budget, it will also help you keep track of dubious charges, if any.
Paying only the minimum amount every billing period leads to interest charges stacking on top of the other. A monthly interest of 2% might not seem much, but that also translates to 24% interest a year.
7. Keep an Eye on 0% Interest Plans
Plan on buying that expensive HDTV or laptop? Ask if the store offers a 0% interest payment plan. You can also ask your credit card company to distribute your bill over a 3-month, 6-month, or 12-month period with 0% interest to allow you to manage your funds effectively.
9. Control your Spending
Impulse buying is often the cause of many people’s credit card woes. Use your card on purchases you know you can pay, and try to pay off a purchase first before using your card once more.
10. Be Familiar with your Credit Card
In the wrong hands, credit cards can be major headache and financial problem. Should you lose your card or have it stolen, report it to the card company’s hotline. Be sure to scan/photocopy your credit card and save the hotline number for emergency situations.