Don't get in financial trouble. Use your credit card wiselyby Divya Kapoor Finance Advisor
Your credit card can promise you great rewards and access to privileges which give you an added benefit on the transactions which you do with the card. However, along with these rewards and benefits, a credit card can also prove to be a financial nightmare if you don’t use it wisely. Credit cards come with very high-interest charges and other fees which prove costly if the card is not managed well. That is why it is always advised to be careful when using a credit card so that you can maximize the rewards and minimize the charges. But do you know how to do so?
Here are some tips on how to use your credit card wisely to avoid financial trouble –
- Clear your bills in time
Credit cards allow you a payment due date which is usually 10 to 15 days after the generation of the bill. You should always clear the credit card bill within the payment due date to avoid interest charges. Once the bill is generated, you know the dues which you have to pay. Arrange for funds within the due date and pay your bills in full. This would help you avoid late payment fees and high-interest charges which prove costly on your pockets.
- Don’t pay only the minimum amount due
Credit card bills have a minimum payment limit called the Minimum Amount Due (MAD). If you are short on funds, you can pay the MAD and revolve the remaining balance to the next credit card bill. Though this sounds like a good benefit, there are charges involved. When you pay only the MAD, the revolved credit starts attracting interest. Moreover, in the next billing cycle, whatever transactions are done using the card do not get the facility of the interest-free credit period. The transactions also start incurring interest charges. As a result, by the time the next bill is generated a large interest payment is built up which might eventually land you in a debt trap. So, always pay your credit card bills in full.
- Don’t withdraw cash using the card
Many credit cards allow cash withdrawal facilities from the ATM. You should avoid using this facility as the cash that you withdraw incurs interest which is an added expense on your pockets. If you want liquid cash use your debit card or withdraw it from your savings account.
- Don’t avail EMI facilities
Credit cards also allow you to convert your expensive purchases to affordable EMIs payable over the next few months. This facility, though useful, incur interest as well as a fee for EMI conversion. So, try and avoid the EMI conversion facility.
- Don’t overspend
The last tip is more like a word of caution. Since credit cards allow you credit transactions, you might be tempted to overspend. This is a big mistake as you would have to ultimately clear the bills yourself and if you don’t you would incur high-interest charges and also damage your credit score. Use your card wisely and purchase what you can afford.
If you follow these tips you can enjoy the benefits of your credit card while keeping the possible disadvantages at bay.
Read also: Identify & escape form credit card debt
Created on Apr 25th 2019 01:04. Viewed 178 times.