At this day and age, credit cards have made our lives quite a rollercoaster ride. At one point, it gives us the opportunity to have quality living easily in terms of managing a financial plan for our needs. However, it can also be the death of our wallet if we cannot successfully meet the “healthy term” that comes with using a credit card.
Credit cards come with numerous benefits, which basically lets you get free-interest loans. As it has great benefits, the stakes for the risk may be just as high — if used wisely it might actually make us rich. So, how can we make the best use out of credit cards? Before we jump into it, let’s weigh on the pros and cons of credit cards to have an insight on it (and decide if it’s for you).
Pros of Credit Cards :
- Easy to carry, easy to use. Credit cards are accepted at more places than charge cards and prepaid cards.
- Safer than cash. If the card is lost or stolen and used fraudulently, just call your bank and cancel it — you’re much more likely to get the money back.
- Buy now, pay later. If you don’t have the cash needed until your next payday or for a major purchase, credit card gives you some extra financial wriggle room — though it should only be used if you’re confident you can pay it back.
- Freebies often come with credit cards — things like air miles, reward points and cashback.
Cons of Credit Cards :
- High-interest payments. If you don’t clear your balance at the end of each month, you’ll have to pay interest on your outstanding balance. The interest rate on a credit card can be quite a bit higher than for a personal loan.
- Beware the debt spiral. Miss just one payment and the interest will start to add up. Unless you pay off what’s owed each month, it’s really easy to quickly spiral into debt if the card is continuously used.
- Additional fees. There are additional fees or penalties for exceeding your credit limit or missing a payment, as well as when using a cash machine.
As shown on the pros and cons list, credit cards definitely have too valuable perks to pass up on. Speaking from experience, I was thrilled and also terrified at the same time when I got my very first credit card. I was scared to make a purchase on the credit card, worried that I might use it carelessly and ended up in debt, suffocating in my own reckless purchases. One thing I learned from my experience in trying to maintain a healthy use of credit card, is that credit card is merely a payment tool, not one to be used as a tool for debt.
Here are 5 simple yet smart ways to use your credit cards:
1. Keep track of your spending
It can be very easy to rack up more debt on your card than you can afford to repay, so it’s important to stay in control. The best way to do this is to keep track of your spending in that period before you make the decision to charge on your credit card.
2. Pay your credit card on time
When you get your credit card statement, check the date the payment is due and make sure to pay them on time. This will help you avoid extra interest charges or hefty late payment fees.
3. Maximise your credit card repayments
If you only make the minimum repayments on your card each month, you’ll pay a lot of interest and it could take years to pay off your credit card debt. If you’re struggling to pay more than the minimum monthly repayment, consider switching to a card with a lower interest rate, and pay off more when you can.
4. Don’t use credit to make ends meet
If an unexpected emergency happens, or if you’re just running low on cash before payday, using credit or taking a cash advance is not going to work for you in the long run. It might get you through the immediate crisis but, over time, you’ll end up even more debt.
5. Check your credit card statement
Make sure that you are charged the right amount for the things that only you purchased, and not charged for anything you did not buy. If there are any transactions you didn’t make, contact your credit card provider immediately, as they may be able to reverse the transaction.