Credit cards are payment cards that allow the issuer to loan money to the cardholder, who then uses the card to pay for products and services rather than using cash. With this card, you can buy different items and use a variety of services without having to use cash. You will also avoid having money taken out of your bank account right away.
When you pay for something using a bank card or a debit card, money is taken from your account right away. However, with credit cards, you can postpone the payment for goods and services to a later date that is convenient. This is because the vendor receives payment directly from the bank or finance company that issued the card, while you pay later.
If you have credit cards, you will probably use them on a regular basis since they are handy for purchases. However, they offer other advantages as well. Please continue reading to understand how to use credit cards.
Benefits of Using Credit Cards
The following are some of the benefits users may derive:
Stolen and lost money may not be returned but transactions made with credit cards can easily be canceled in the event that you misplace your wallet. Most financial institutions have strong security protocols that safeguard your funds if you misplace your card or it is stolen.
Your credit card payment records dominate your report and determine how successful your loan application will be. If you intend to have a good rating, ensure that you repay all credits in good time. This will help you qualify for benefits such as car loans or mortgages.
Easy Request for Chargeback
If you observe that a purchase falls below your standard or a company fails to deliver a product within a timeframe, you can easily request for a chargeback through the card provider.
No Currency Limitation
You can easily use your card to conduct business transactions in foreign currencies. Although some of these transactions attract extra charges, they are beneficial to those who regularly patronize online stores overseas.
The benefits attached to shopping online are still applicable to vacations and business trips. If you are vacationing in norge (Norway) or other countries, you will certainly need a credit card to conduct transactions in local currencies.
Provides an Emergency Helpline
If you have an insufficient balance or savings to accommodate additional expenditures, credit cards can serve as an emergency financial cushion. This allows you to settle urgent bills and then repay when the funds are available. You will find that this is a convenient way to settle bills especially when you are out of town.
Travel insurance, prolonged warranty insurance, and purchase protection are some of the extra benefits that can help you save money. Other features include free flight offers, airline bar passes as well as free drinks when dining.
Consolidation of Balances
You can use credit cards to transfer outstanding high debts to a new account with lower interest rates. With this, you can save some money accrued from interest fees or even repay your loans faster.
Used for Online Shopping
Credit cards are used in a way that the total sum to be debited is separated from your account before the financial institution settles the vendor directly. Credit cards don’t attract extra fees if you repay the financial institution within a time frame. This window allows for additional security especially when buying things online since you will receive the purchased items before making payment.
Steps to Using a Credit Card
The following are some steps involved in using credit cards:
Understand How it Works
Getting a credit card is the first step you should take. These cards come in two types: secured and unsecured. The secured card requires a monetary deposit that will serve as collateral while the unsecured does not need collateral. These unsecured cards are issues based on a person’s creditworthiness.
Whether you choose to apply for a secured or unsecured credit card, make sure that you make your repayment on time. By doing this, you can boost your credit score. You can get a more detailed explanation of how it works here.
Have a Budget
Credit cards allow you to make a purchase or earn rewards but it must not be used to get things that are not necessary. Having a set budget plan will help you avoid excessive spending. Calculate the amount you will spend for each month. Set aside money to pay off your balance.
If possible, curate your budget under this format: 50/30/20. 50% should go into your necessity while 40% should be for things that you want but do not necessarily need. The remaining 20% is for savings and debt repayment. By having a set budget, you will be able to curb mismanagement of your credit card.
Have a Record of What You Spend
The next important step to take is to have a track record of what you spend in a month. To help you with this, you can use the credit card’s website. If you reach your monthly purchasing limit, do not use the card anymore till you pay off the balance. Having this discipline will help you to boost your credit score and avoid getting into debt.
Have an Automatic Payment Setup
You may sometimes forget to pay off the loan at the end of the month. To help you avoid this, try to set up an automatic payment schedule. Make sure you have enough funds to pay off the bill before scheduling the payment.
Do Not Use Past the Limit
Since these cards are easy to use, many people end up misusing it. They end up spending more than their credit limit. Using a card properly can affect your credit score in a positive way. Misusing these cards will not only reduce your credit score but put you in debt.
Pay Your Bill in Full
Some financial institutions allow you to make a minimum payment each month-end. This can be a lesser amount than what was spent in the month. This makes your bill payment easy and cheap but it comes with a price. By paying less each month, your total debt keeps piling up. In the end, you will end up paying more money.
The best way to avoid this is to pay off your bill in full every month.
Read Through Your Statement for Each Month
At every month end, your financial institution will send a transaction statement to you. This statement contains the details of all the payments and purchases you made during the month. Always make sure to read through this fine print. If you notice any errors or charges, do not hesitate to inform your card issuer about this.
If the financial institution has a website, you can personally track down your payments with this. By creating an online account on these sites, you can check your transactions made in a month and spot out any unauthorized charges.
Understanding the reward offer of a credit card is important. There are different reward cards available to choose from. The type that you should choose must depend on what you spend on the most and your lifestyle. Since these rewards come with an expiry date, always check the cards for this information.
Know How to Avoid Certain Fees
Not all card fees are compulsory to pay for. Aside from the annual fee, there are some fees that can be avoided if you forego certain things. For instance, you can avoid late fees by paying off your bill early. You can also avoid transaction fees when you make a purchase overseas by using a card that is not affected by it.
There are many benefits attached to using a credit card. When used right, these cards can help to improve your credit score, earn rewards and pay off debts.
Understanding the Use of Kredittkort (Credit Cards) is a feature post