Credit card usage has become quite common in modern times as they provide people with the benefits of great financial freedom. They enable the users to spend money whenever and wherever they like without having to worry about the availability of funds for the same. In this respect, credit cards are similar to instant loans, as they enable the users to make expenses based on their assurance of paying back the same within the given time. However, it is this very feature that can lead credit card users to financial doom, if they fail to manage the same efficiently. Being aware of the below discussed Do’s and Don’ts of efficient credit card management can help the users develop the skill of using this excellent financial tool to the best of their advantage.
Maintain A Low Credit Utilization Ratio
Top financial experts stress the importance for users to maintain their credit card balance below 50% of the credit limit. Having a credit card balance that is more than 50% of their total credit limit can adversely affect the credit score of the users. When such high balances are carried over from one month to another, the interest charged for the same also increases. As it is, the interest charged on credit cards is already quite high and ranges between 16 to 34% per annum and a further increase in the same can land the users in a financial mess.
Make Credit Card Bill Payments On Time
As mentioned before, the interest charged on credit cards is quite high. This means that any delays in the payment of credit card bills will result in the accumulation of a high balance and this, in turn, will result in a high-interest rate on outstanding balances. This can cause great financial stress for the users besides having a deeply negative impact on their credit score. Alternatively, paying the credit card bills on or before the due date will help in improving the credit score of users besides minimizing their financial stress.
Pay More Than The Minimum Amount
Most credit card companies offer their customers the option of paying a minimum amount of the total bill every month. However, the users should avoid falling into the trap of making only minimum payments a regular habit. Rather, they should try to pay the dues in full whenever possible, and even if they cannot make complete payments, they should pay the maximum possible amount. The option of paying a minimum amount should be used only when the users have no other choice.
Carefully Scrutinize The Promotional Offers
Credit card companies often lure their existing as well as potential customers with a wide range of promotional offers such as zero interest quick loans online. However, customers should carefully scrutinize any such offers and their needs before accepting them. Even then they should seek complete details about the terms and conditions of these offers and the benefits they are likely to provide so that the users do not end up bearing an unwanted financial burden.
Learn About The Joining Charges And Renewal Fees
Most credit card companies charge a minimal joining fee from their customers and also expect them to pay a renewal fee at the end of each year. In most cases, the users are unaware of these charges or their exact amount which results in poor management of the cards. Gaining detailed information about the fee charged by the credit card service providers can help the users make the right decisions. This is especially true if the service providers offer the provision of fee reversal for customers spending more than a certain annual limit, as it can help them save money on annual fees.
Make The Most Of The Reward Points
Every credit card company has a rewards system in place for its customers wherein they can gain benefits in the form of gift vouchers, free access to airport lounges, discounts on the purchase of specific products and much more. Card owners should make sure that they use their cards in such as manner that allows them to make the most of these benefits. For this, they need to first seek detailed information about the structure of the rewards system and the best time to redeem the reward points for maximum benefit.
Avoid Using The Credit Cards For Impulsive Buying
The ease of shopping offered by credit cards often makes the users indulge in impulsive buying which is a big no-no. In most cases, such impulsive buying can add up to a major bill for items that may not be of much use to the card owners. This will not only result in the accumulation of a whole lot of unwanted items for the card owners but will also cause a major financial crisis for them. The best way to avoid such a situation is to use credit cards only for making big ticket purchases and use cash while shopping for smaller items.