Nowadays, cash is hardly used in our daily transactions, so we use the tools provided by the bank, credit cards, debit cards, e-cards, virtual payments, payment buttons and apps, and other products that facilitate payments.
But with these advantages come some big problems, the most notorious and dangerous of which is the specter of insurmountable credit card debt. The fear of credit prevents many people from using this tool to its total capacity, either because of mismanagement or previous negative experiences, both their own and those of people they know.
While it is good to be aware of the dangers of misusing credit cards, it is essential to remember that, with proper foresight, credit cards can significantly enhance the pool of resources. We have compiled the best tips for making the most of credit cards.
1. Budget monthly.
One useful purpose of credit cards is to allow several small, repetitive purchases to be consolidated into a single bill. Most cards have a grace period in which no interest is charged, usually during the next billing cycle. The loan is free if the balance is paid off before that date. If you take advantage of this, you can bundle many monthly expenses, such as gas, groceries, and bills, into one account.
The nice thing about this is that monthly budgeting can be done entirely from a single statement. Purchases can be tracked, trends noted and adjustments made for the next month.
In addition, many cards offer cash back, points, or some reward system to encourage this use. If you pay off the balance each month, you can reap the benefits without the interest charged – but be careful to set just what you can afford to pay off in a month!
2. Beware of impulse purchases.
Impulse purchases are a brutal way to overcharge your card. The most attractive quality of the credit card is its ease of use. You can buy anything with a simple swipe and a signature. For many people, paying later is almost the same as never paying. This is not true.
To limit the impact of impulse purchases, keep cash next to your plastic, and try to use it only when making purchases outside your monthly budget allowance. If you need a monthly budget, that’s an excellent place to start managing credit card debt.
3. Take advantage of offers.
When credit cards offer 0% introductory interest rates, it can mean relief from existing debt and interest. Switch balances to these new cards and enjoy a year or more of interest-free debt.
This method is ideal if you can pay off a balance before the 0% offer ends or if you have debt in several places. Just update your file cabinet with the new account numbers and card names, and cancel old, empty accounts!
4. Only have cards you can manage.
When getting a new card or transferring balances, ensure the total number of cards is within your ability to organize bills and pay them on their due dates. Failure to make payments can result in hefty late fees.
Also, balance transfers take up to 6 weeks, so don’t forget to pay the “empty” card on the due date. If you are unsure if you owe a payment, call the 1-800 number on the back of the card.
Another good strategy is only to carry one card. Keep the others in a file cabinet, safe from cash registers.
5. Be realistic.
It can be easy to fall into the trap of believing you’ll be able to pay off debt quickly and easily. Holiday shopping can lead to this mentality. The urge to charge all the gifts on a credit card and then pay them off over the year can be tempting, but be realistic about your income.
A good rule of thumb is never to charge more money on your credit card than you earn monthly. This will keep debt manageable, even if you run into unexpected expenses or hardship.
6. Build your credit.
Besides the obvious advantage of buying things you couldn’t afford, credit cards also increase your credit rating. If you use the tips here for using cards responsibly, you’ll improve your creditworthiness.
The benefit? Lower interest rates, higher limits, and access to private bank loans are otherwise unavailable to consumers with poor credit. With an established (hopefully positive) credit history, it’s nearly possible to get a reasonable mortgage rate or an auto loan.
7. Know when to ask for help.
Finally, don’t hesitate to contact professional help if you get into trouble. Do it as soon as possible. Credit debt is a rolling snowball, so make sure you get ahead of it before it gets out of hand. Credit repair services can help you organize your bills, consolidate them into single payments, and eliminate invalid debts from your balance.
“Have what you have, spend less.”
We at Credit Repair Systems Inc of Miami offer this service. With decades of experience in credit counseling and credit counseling, we can advise you on the best way to keep your credit positive and even appeal decisions that negatively affect.