How to Manage your Credit Cards Responsibly
When I got my first credit card, I felt like I could buy anything I desired. You might feel tempted to overspend when you have a credit card. However, it is important to note that even if a credit card helps you buy things that you would not otherwise afford, it’s not free money. The way you manage your credit cards will affect other areas of your life, including your eligibility for other loans. I have created several tips that can help you manage your credit cards responsibly and avoid any regrets.
No matter how tempted I feel to overspend, I always keep track of my spending to avoid overdrawing my account. By minding what I spend my money on, I avoid going over my credit card limit. Above all, you should always have a plan. Ensure that you plan both your income and your expenses. Budgeting and knowing how you will use your money helps you pay your loans and your credit card balances on time, keeping you out of debt.
Studies indicate that we are likely to spend more when using credit cards than when buying items in cash. Buying cash has a psychological effect that prevents you from overspending. This hesitation disappears whenever you use a credit card. I always avoid falling into this trap by ensuring that I only buy what I need.
You should live within your means and only buy the things that you can afford even when you buy on credit. Living within your means is a primary rule in credit management and personal finance. Even if you are buying using your credit card, you need to be sure to afford the repayments.
I always ensure that I pay all my credit card debts on time. If you don’t have a consistent payment record for your credit cards, you may have difficulty getting a loan later in life. I use my credit card to improve my credit score, making me more eligible for other loans. You can build your credit score by ensuring that you put several purchases on your credit card every month but pay them off on time. Every time you pay your credit card debt on time, you build your credit score because this information is shared with credit bureaus.
In many instances, I have used my credit card to earn travel rewards and cashback. If you use your credit cards responsibly, you would be surprised by the hundreds of dollars you would save every year. You should use one or two cashback credit cards to make almost all your purchases. You should not stress too much over which reward credit card to obtain. All reward credit cards yield about the same benefits depending on your level of spending.
Most credit cards will allow you to pay for a large purchase over time. However, this isn’t always a good option, especially if the payments will accrue interest. Instead of using my credit card to pay off a large purchase over several months, I would prefer to save up money ahead of time and pay in cash. I wouldn’t advise you to borrow money at the regular credit card rate if you can avoid it. However, if you have no other option, you can make a huge purchase using your card and pay over several months, although this will be a bit expensive.
I agree credit cards are a powerful tool. However, if you don’t know how to use a credit card responsibly, it can turn out to be dangerous. You may end up accumulating a huge debt that you have to pay for years. When used responsibly, credit cards provide unmatched convenience.