Credit cards can be very helpful when you experience a bad financial situation. It will give you a breathing space when you urgently need money for your expenses like paying electricity bill, medical house rent, gas, or groceries. But credit cards can also be a great danger for your finances if you don’t use them wisely.
Here I am telling you about 10 golden rules of using credit cards. By following these rules you may get all the benefits a credit card can give you, without having to deal with the issues that can damage your finances. So, let’s check them out.
1 Have a credit card if you can make full payment
This is the most simple and straight rule of credit cards. Paying off your credit cards in full is the best financial move you may select. Keeping credit card balances may cause you high-interest charges every month. Use your credit card in such a way that it may help you to grow financially, and also increase your credit score. Do not use more than 30% of your credit line. You must always avoid penalty charges, interests, and minimum payments. If you don’t think you can pay off your credit card balances in full every month, then you should use cash, and avoid incurring debts.
2 Negotiate into a lower interest rate
It is one of the most important factors of a credit card. Its annual percentage rate (APR) is normally quite high than any personal loan. So, you may have the chance to negotiate your credit card interest rate with your credit card provider. If you have a good or strong credit score and have a good payment history (on time payment), you may ask your credit card provider to lower your APR.
3 Make more than the minimum payment
Every credit card determines a minimum limit of your payment each month, depending on your credit card balance. You need to make that minimum payment to the credit card company if you can’t pay your total credit card bill in full. Making minimum payment doesn’t lower your interest rate. With every outstanding dollar you will be charged a significant amount of interest with the main balance. So, try to pay in full every month.
4 Grab sign-up bonuses
A credit card comes with different offers. When you use a credit card, you are eligible to get certain reward points. However, if you take out a new card, you may also be eligible for sign-up bonuses as well.
Credit card providers offer new sign up bonuses to attract new customers. Some credit cards can offer a big bonus point as sign up reward, where others may offer a monthly bonus for the first three or six months of being a card user. Some credit card providers may allow you to exchange bonus points for a free airline ticket in the U.S. So, choose any of them as per your requirement. But make sure the charges you are paying yearly to retain the card must not exceed the bonus value.
5 Take advantage of credit card rewards
As mentioned earlier, many credit card providers may offer you attractive rewards. You will have many credit card rewards to choose from which may give you free travel, free air tickets, free hotel stays, account upgrades, and many more perks. Find the credit cards with rewards which may suit your preferences. But while choosing the rewards make sure you read all the fine print.
6 Don’t take a cash advance from your credit card
Credit cards are beneficial for urgent spending. You should take out money from bank accounts when you need cash. Never take out cash advances using a credit card. When you use a credit card to pay for any service or to buy anything, you are generating a balance on your credit card. You’ll also have a fixed due date every month to pay that balance. No interest is charged on your balances before the due date. But when you borrow cash from your credit card through a cash advance, the interest clock starts immediately. You have to pay fees and high-interest charges until you pay off the balance entirely. Usually cash advance limit is lower than your credit limit.
7 Build credit with a secured rewards card
Many of us got our first credit card when we were students. A credit card is a good tool for building your credit score initially. You may choose a secured credit card as your first credit card. It can help you to build a good credit history along with a good credit score. A secured credit card requires a refundable deposit to get an equivalent credit limit. As the card has a security deposit, your due bill will be adjusted from that deposit. But, by making on-time payments in full each month, you can become a responsible borrower with a good credit score.
8 Consolidate your credit card debt
If you have high-interest credit card debts, then you may take out a personal loan and consolidate these debts. Personal loans normally offer lower interest rate compared to credit cards. Personal loans have a fixed payment every month, which contrasts with credit cards. You can opt for a personal loan online to consolidate your credit card bills. That loan might be called a credit card consolidation loan. You can also sign up for a debt consolidation program and consolidate your credit cards through easy repayment options. You should always try to pay off your most expensive credit card balances, for example – credit card debts or payday loans so that you can save on the interest payment.
9 Use a 0% APR card to pay off credit card debt
A 0% APR credit card is a wise choice to pay off your credit card debt with minimum cost. You may transfer your high-interest credit card balances into one or more 0% APR credit cards. These credit cards can give you an option to transfer your high-interest credit card balances into a 0% APR card, for a period of up to 12 months. You can make minimum payments on these cards with incurring more interest till the grace period. But do not forget to make the minimum payment every month, and pay off the entire balance before the introductory offer ends. You may ask your credit card company to allow you for making purchases at a 0% APR using those cards.
10 Set up auto-pay option
You can set up an auto-pay option with your bank account so that it automatically pays your credit card every month. You can pay your balance in full or set up only the minimum payments. This will ensure that you’ll never be late on your payments. Review your account statement online every week if possible. It is mandatory for you if you pay off your credit card bills at the end of every month through an autopay option.
These are only 10 of the most important rules to maintain a credit card. If you can recall some more, keep us informed with comments.