The convenience of using a credit card to make your payments without carrying cash around with you can be offset by serious disadvantages if you are careless.
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Tips on how to use your credit cards
The convenience of using a credit card to make your payments without carrying cash around with you can be offset by serious disadvantages if you are careless. Here are a few tips on how to use your credit card.
1. Avoid using your credit card for routine payments such as grocery bills. If you still need to make these payments using your credit card, keep a separate card for this purpose, and ensure that you make the payments on this card promptly. If you don't do this, you may end up paying interest on your routine expenditure.
2. Use your card's credit facility sparingly, and for one-time large purchases or emergency expenditure. Make sure that these are charged to a separate card, so that you can enjoy the credit facility without losing sleep, or loading the interest burden on other expenses.
3. Ask yourself whether you really need credit, and if so for what period. Make a plan for the repayment of the credit on the credit card. It is a good idea to use your card's credit facility only if you are sure that you would be able to repay the amount within a short period. If you need credit for longer periods, you should look at other options that offer you longer term credit on more favorable terms.
4. Know the charges that are applicable on your credit card. This will help you to plan your expenses, and also help you know in advance what lies in store for you. The usual charges are interest on outstanding amounts, transaction fees, late payment charges, and annual fees.
5. Credit card companies generally charge a onetime transaction fee on cash withdrawal, even if you pay the amount on the card as soon as you receive it. It is generally not advantageous to use your card to withdraw cash. You should rather use it for paying off the expenses directly, if possible.
6. Finally, make sure that you pay the minimum amount due on your card on time. In any case, avoid being labeled as a defaulter, because that can damage your credit history.
The long and short of it all is that you should use your credit card only as a convenient means of paying your expenses, and not as a source of credit, which you can obtain on better terms elsewhere. It is also important to ensure timely payment of the dues to avoid penalty charges and high interest rates.
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