Using a credit card wisely is important to avoid making mistakes that can burn a hole in your pocket. Here are some tips to help you use a credit card wisely:
Understand Fees
Your credit card may have some fees attached to it. You may be able to avoid some of them based on your usage of the card. Some of these fees include:
Late fees: If you pay your monthly payment after the due date, the credit card issuer will charge you a late fee.
Annual fees: This fee is charged once a year on your card. Some credit card issuers waive off this fee in the first year, while some may not charge it at all.
Some other fees you may be charged are a finance charge, cash advance fees, foreign transaction fees, and balance transfer fees.
Read Your Billing Statement
You’ll receive a billing statement every month, enlisting all the transactions made during the billing cycle. Your billing statement also includes your due date, outstanding balance, and your current minimum payment.
Don’t assume that everything on your billing statement is right. Read through your statement thoroughly and check every transaction to make sure none of them are unauthorized. If you find any errors or unauthorized charges, dispute it with your credit card issuer.
Avoid Debt
Using a credit card means borrowing money, which increases your possibility of going into debt. The best way to avoid credit card debt is to only purchase what you can afford. This will allow you to pay your balance in full every month, which in turn helps you steer clear of credit card debt.
If you reach a point where you can’t clear your full balance, cut down on using your credit card for purchases until you can afford them.
Deal with Fraud
Most credit cards have a credit limit (the maximum amount you’re allowed to spend using your credit card) associated with them. This limit varies based on the type of card you’ve applied for, your income, and your credit history.
Staying within the credit limit helps you avoid penalties and maintain a healthy credit score, along with keeping your account in good standing.
Aside from these, choose the right card, make timely payments, understand the interest rate on your credit card, and deal with fraud.
