Avoid debt: 8 Smart ways to manage your credit cards wisely


“With great power, comes great responsibility” – Voltaire

The line not only applies to our superheroes but is also applicable to our everyday savior – credit cards. They play pretty much an amazing role in our everyday life.

I mean, think about it.

You leave your home unburdened by cash, yet purchase the necessary goods and get the rewards, like free air miles or free hotel stays, for the amount you spend using these cards.

Now, isn’t that a great feeling?

Apart from the convenience part, we can’t deny its role in building a good credit rating either. Truly amazing!

But, you the moment use it irresponsibly, it will hurt you like hell. Many people get caught in the vicious cycle of credit card debt just because they can’t manage plastics properly. They consider it as free money and spend as if they don’t need to pay it back. Finally, they get caught in the debt trap.

So, you can see how important it is to use this powerful tool wisely. But before I jump into the fact that you can manage your credit cards wisely, I would like to sum up some of the advantages of using a credit card.

Here are some of the key benefits of using a credit card:

  • Safety: Carrying plastic rather than liquid cash is a much more convenient and safer option. If stolen, they can be easily locked, but retrieving your stolen cash is way too difficult.
  • Building a good credit rating: A responsible usage of credit cards can help you build a good credit rating. Payment history is one of the key factors in your credit report and score.
  • Reward programs: Most credit cards have a reward program where you get some reward points for your purchases. It usually comes in the form of cashback, gas station purchase, free dining, or travel miles. You can consider credit card rewards as one of the crucial benefits of using plastics.
  • Flyer miles are great for travelers: There are great benefits of using a credit card, for example, credit cards are great for travelers. If you are a frequent flyer, who has opted for one of those frequent flyer credit cards, you should know how beneficial those are. These cards are somewhat like reward cards. Here, for every $1 or $2 purchase, you earn points and once you accumulate some points, you can redeem them later on flights, airport lounges, or the concierge services. Didn’t like the economy seats on your last flight? Well, you can upgrade it to business or first class with the help of these points. Sounds great! Isn’t it?
  • Cashback: Some credit cards are made for earning cash backs. Here, unlike the reward points, you get a certain amount of money back for your selected category’s spending. It is one of the best ways to manage credit card payments since you have to pay less than what you’ve spent.

Okay, so I assume by now the key advantages of using a credit card are pretty much clear to us. To summarize, they are safer than carrying cash all the time and they also help in building good credit. This will help you earn rewards, flyer miles, cashback, etc.

But does this mean that we can use it like crazy? Certainly not! Remember, the roses come with the thrones!

As I told you before, credit cards are not free money; so you need to be cautious while using them.

Here are 8 simple tips to help you use your plastic wisely to avoid accumulating debt.

01. Don’t procrastinate

Once you receive the statement, make sure you pay your credit card bill within the given time limit. Missing your payment deadline means incurring heavy interest on your outstanding amount as well as paying late fees. If you procrastinate paying your bill repeatedly in almost every month, it will lead you to accumulate credit card debt. In my opinion, it is the single most important tip to manage your credit cards wisely.

02. Don’t get caught in the minimum payment trap

If you ask me about how much of a credit card bill you should pay, then I will always suggest paying in full every month within your last payment date. I also know that sometimes paying the full bill amount just seems to be impossible. Sudden medical spending or any other major emergency spending can derail you from your regular payment track. So, in such scenarios, when you can’t pay in full, I would suggest paying at least more than the minimum payment amount (as much as possible).

Why…? Because if you start paying the minimum amount, the interest rate will start to accumulate and so will your credit card debt. So, pay as much as possible.

03. Keep track of your spending

Do you monitor your spending? Well, it’s very important too. Opt for transaction alerts (which most credit card companies will allow you to sign up for free) that will send you an email or a message alert for every transaction.

Monitor your credit card account online to track your spending and current credit card balance.

If there’s any purchase that looks suspicious, you can report it to your credit card company even before the bill is generated.

Keeping a track of your credit card usage will not only help you to fight against fraud but also tells you how much you have spent and when to control your further usage. After all, prevention is always better than cure.

04. Don’t use your credit card for cash advances

Avoid using your credit cards for pulling cash. Why? Because, when you use your plastics in that way, your interest rate starts right away and you also incur ATM fees. They add up to a high substantial cost for your easy cash; and if you make it a habit, it will be powerful enough to put you into credit card debt. So, next time you go for a purchase and find that you don’t have enough balance in your bank account, or when a sudden requirement arises for some emergency cash, think twice before using your credit cards for that liquid cash.

05. Read the fine prints (hidden fees)

Did you read the fine prints on your credit card application form? No? Well, you are not alone. Most people don’t do that and regret it later when they find a hidden fee or a high-interest fee in their credit card statement. When taking out a credit card, it’s better that you read and understand about all the fees of your credit card and then decide which card to opt for as per your priority.

06. Avoid taking out too many cards

How many credit cards do you have? 4 or 5? Why on earth did you open so many credit card accounts?

Well, many of you will argue that why not? Or maybe after you took your first credit card, you started seeing so many lucrative credit card offers (like 0% interest or maybe 0 annual charges) that it was hard for you to resist; and you applied for those without realizing how much damaging effect these have on your finances.

What if I tell you that using too many credit cards not only increases the chance of overspending (and thus makes you fall into debt), but also can ruin your finances too. Shocked!?

Yes, it’s true. You see, when you open too many credit card accounts in a small period, it shows a red flag to your credit bureaus, and as a result, your credit score can decrease. If necessary, keep a backup card for emergencies but avoid taking out too many.

07. Limit your credit utilization

If you are using your credit card to build a good credit score, then the best way to do it is to keep the credit utilization ratio under 30%. Wondering what the credit utilization ratio is? Well, it’s nothing but the amount of debt you have accumulated compared to your total available credit limit. Why is this important? It is because the credit bureaus use this as an important parameter to determine your credit score.

08. Think twice before swiping your card

Yes, I agree. It happens to all of us. We see something in the store (maybe on sale) and start craving it so much that we swipe our card and buy it without thinking twice. But the fact is, you get into trouble when you start using your credit cards for irrational purchases. Your credit card is not your money source. You will need to repay the amount on your next deadline.

So, next time when you will think about swiping your credit card to make a purchase, think again. Do you really need the product or do you just wish to own it? The bottom line about using your credit card wisely lies in the fact that how well you can prioritize your needs over wants.