Credit Card Benefits
Credit cards help you build your credit-history within limits. They help you handle many of the emergency and unplanned expenses the average employee faces annually. They can also win you rewards like cash-back, discounts, and gifts.
If you repay your credit-card balances on time, it can be helpful in securing personal and mortgage loans. Banks and financial institutions prefer customers with credit ratings over those who never use their credit cards.
Credit Card Pitfalls
The risks of using credit cards are overspending and purchasing things you don’t really need. You may make blunders without planning a logical budget according to your earnings and repayment capacity. The negative rating can hurt your financing and loan prospects.
Smart Credit Card Usage
Identify the difference between need, want, and desire. You have to prioritize needs before the other two. For example, you may need a refrigerator and a washing machine for your home. You may want a home-theatre system for your entertainment. You may desire a week-long holiday in Thailand with your family.
Cash vs Card: You may choose to pay cash when you walk into the neighborhood store to buy chocolates for your kids. You may use your credit card to buy groceries for the month. It would be a smart practice to use cash for small payments while using the card for modest and high-value products.
On-Time Payment: Clear all your credit card balances within their deadlines. It helps to improve your credit rating. Unpaid credit card debts follow wherever you go and can ruin your chances of applying for bigger loans.
Repayment-Options: There are two ways in which you can ensure on-time debt clearance. The first option is to buy inside your repayment limitations within the deadline. The second option is to request a deadline extension. You can do it by opting for an EMI at your bank or financial institution. But you may need to pay extra interest in retaining your credit score at a higher level.
Utility-Bills: You can use your credit card for making utility bill payments. It helps you to save cash for emergency funds. If you have not used that fund during the month, you can always use it for repaying your credit card debts later on.
Payday-Deductions: You can automate repayment by linking it with your pay-day deductions. It prevents from over-estimating the expenses for the subsequent month. Then you can start planning your budget for credit cards within your limitations. The probability of a negative credit core will also get reduced considerably.
Limited-Cards: The recommended practice is to use a limited number of credit cards. If possible, keep only one or two cards. Having too many cards can confuse you and the probability of crossing your repayment limitations.
Travel-Expenses: Make your travel expenses with credit cards. It helps you save cash for emergency needs. Create a travel expenses budget and make sure you spend within the limitations unless the unforeseen expenses make you use the credit card more often.