World finance runs on credit. Today, a large portion of all fiat currency is credit. And while it is incredibly convenient to have a small piece of plastic pay for your expenses, one wrong move could lead to your financial obliteration. Credit cards can be dangerously seductive, and the truth is that some of the best hacks and techniques to keep yourself under control regarding credit card usage can also be some of the most boring but essential tips anyone can offer.
In this article, we will be covering some of the crucial tips to wisely use your credit cards.
Create a well-planned budget and stick to it
You are likely to splurge your hard-earned money if you do not have a mechanism in order to prevent yourself from doing so. This is where a budget comes in. Outline all of your sources of income and potential monthly expenses in this budget. This can give you an estimate of how much you can invest into yourself, into other assets, and how much is remaining to splurge on your luxury - how much debt you can afford to take and repay.
Don’t be too harsh or too soft on yourself though.
Don’t borrow more than what you can’t pay back peacefully
This can improve your credit score drastically by indicating that you can be depended upon to repay any amount you have loaned out. A useful rule to include in your budget would be to spend a maximum amount of one-third of your income on debt-related instruments like mortgages, car loans, and of course, credit cards.
Pay your bills on time
It is incredibly important to ensure that you pay your bills on time every single month, which will massively boost your credit score. You can also avoid having to pay late fees or any interest on your unpaid credit, which may snowball into an unaffordable amount down the line.
Carry credit card balances responsibly
The amount of money you are yet to repay your credit card company is called ‘balances’. While it is highly beneficial to avoid carrying a balance, it is likely you may have to in case of difficult financial circumstances, like the covid job crisis for example. Do your best to keep the balance below 25-30% of your credit limit at any time.
Keep an eye on your credit reports
Ensure to cross check your credit reports at least once a year and monitor your credit score, to help you identify and correct errors like loans you’ve paid off but still show up as “open”, fraudulent accounts you aren’t aware of, and any possible incorrect personal information such as your address, or marital status.
Never use your credit card on websites you don’t trust
Not all websites have the URL beginning with https:// (where ‘s’ stands for secure). Phishing attacks meant to steal your credit card information are common on the internet and be very careful before entering these websites, let alone sharing your private credit card details with these sites.
On a general note, avoid visiting websites that begin with http:// or any unfamiliar domain names.
If you’ve misplaced or lost your credit card, report it to the credit card company immediately
Credit card companies use the chip in credit cards to mitigate risk. There is a possibility that you will be charged for transactions conducted on your lost or stolen credit card, even if it isn’t performed by you. So be very quick to report the misplacement to the credit card company immediately.
Make the most of your rewards
To attract new customers, credit card companies tend to offer joining benefits and reward programs, typically in the form of gift vouchers, free tickets, free lounge accesses, airport priority services, etc. Aim to utilize your cards to get the best deals possible from the reward programs.
However, see to it that you pay your bills on time so that you can benefit from the rewards programs with peace of mind. It’s not worth taking on a lot of debt just for the reward programs. A balanced and planned budget is crucial and the company offered rewards programs are, well, rewards.
The truth is that sticking to simple habits and controlling your lust for spending more can enable credit cards to be an extremely useful tool in your financial armoury. My relatives tell me tales of how credit cards have saved them from financial disaster during tough economic conditions, and many wealthy businessmen have explained how using loans and credit cards at low interest rates can allow them to reinvest their payable money into investments giving higher returns.