One of the most efficient ways for people to make purchases involves using credit cards. These simple pieces of plastic help people who are planning a vacation, looking to make purchases online, or want to pay their bills with ease.
Perhaps the foremost benefit with using credit cards is that they can be used as a way to improve your credit score, which in turn can help you when applying for a loan to buy a new car or house. With that in mind, there are also dangers to using credit cards that you must be aware of.
While using credit cards can improve your credit rating, it can also damage it if they are not paid back on time. This is the unfortunate paradox that exists. While using them can bring immediate benefits, it can also couple with disastrous disadvantages to your credit rating if misused.
We shall now focus on three ways to make sure your credit cards work for you.
The First Step
How to choose the right credit card. If you can get a 0% interest card, then acquire one. If you already have a credit card with a high interest rate, consider transferring the balance to another card with a 0% rate.
Do not go with the first offer. Research interest rates, and any penalties associated with usage or late payment. Some credit card companies are willing to work with people more than others. Know the reason for wanting a credit card and find the one that is right for you. For example, if you are in need of some quick extra cash on hand for the month, go with a credit card that has a low limit.
Transferring your current credit card debt to a 0% card charges less than for personal loans. Usually, the transfer fee is no more than 3%. Plus you can vary the amount you pay each month unlike most loans. Often prepaid credit cards can be the best option for young adults, students, so their budget can be managed with a ceiling on their spend.
The Second Step
Don’t lose your financial freedom by accruing debts you cannot afford. Credit cards are there for you to increase your credit rating, not as a substitute for money you do not have.
You should never take more than you can pay back immediately. This should go without saying, but many people suffer poor credit ratings from making purchases they have no hope of being able to pay back in a prompt manner. If you are not going to have the cash for your purchase, don’t use a credit card for it.
Misusing credit cards is very dangerous as it can easily lead to becoming a slave to wages as you spend all of your extra income on trying to keep your credit in good standing.
The Third Step
Since a credit card can offer protection against something bought being lost or stolen as well as offering insurance, it makes sense to use the card for large purchases. In addition, other benefits offered by Visa and Mastercards are travel discounts and insurance. Though, as mentioned, ensure you have the funds to cover the credit card purchase.
If you lose your card whilst abroad, simply report it lost to the credit card company right away to avoid being charged for fraudulent usage.
If you follow the above three steps when choosing and using credit cards, you will see your credit rating increase and enjoy the many benefits and conveniences of owning a credit card rather than falling foul to the paradoxes of its usage.