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7 Tips on How to Use a Credit Card Wisely.

Credit cards can be scary for some people. I have friends who have refused credit card offers not because they don't like the credit card per se, but because they're afraid of the debts they may incur, the high interest rates, and the time it will take for them to pay off their balance. 

As someone who has been using credit cards for almost two decades (I got my very first primary credit card when I was 22), I'd usually tell my friends and peers to not be afraid of credit cards and instead think of these microchip-embedded plastic rectangles as their ally, their weapon, and their best friend. That's how I usually think of my credit cards, and over the years I've reaped countless of benefits from being a credit card user - from discounts to cash rebates, to gift certificates, mileage rewards, and restaurant treats... but  the biggest benefit of all would have to be my multiple entry visa to South Korea

Of course, these benefits come with responsibilities because just as the saying goes, "With great power comes great responsibilities". And with that, here are some tips on how you can maximize your credit card without getting into debt:

Photo credit: Money Digest

Set a budget
Overspending with your credit card is an easy trap to fall into. We've seen this scenario many times over in movies and TV dramas - girl walks into a store and plans to buy just one item, leaves the store with several paper bags in tow and a maxed out credit card.

However, this can be avoided if you set a budget on how much (or how little) you can spend using your credit card. Having a realistic idea of the amount you can spend AND pay off will keep you from swiping nonchalantly and buying things that you don't actually need. 

Monitor your purchases
Once you've calculated the amount that you can afford, the next step is to keep track of your purchases. Make sure not to spend beyond the limit that you've set, and avoid using your credit card until you have paid off your balance. Not only will this kind of mindset keep you out of debt, it can also help you in building a good credit score.

Photo credit: Tara Winstead on Pexels.

Take note of your savings
When using your credit card, you must also be cognizant of your savings and bank account balances. Personally, I wouldn't want to make charges with my credit card if the cash that I have on hand or the funds that I have in my bank account won't be able to cover it when it's time to pay my bill. 

That being said, I make sure to check my bank account balance on a regular basis and set savings goals with the help of this Savings Calculator. Doing so helps me map out my finances better, allows me to make better financial decisions, and prevents me from spending beyond my means.

Be wary of the fees
Aside from the interest rates and the annual fee (which can actually be waived based on certain conditions), you should be aware of other credit card fees and how you can avoid them. For instance, you can avoid late fees if you pay ahead of time. Don't make cash advances to avoid cash advance fees. Most importantly, don't spend beyond your credit limit to avoid over-the-limit fees. 

Reap the rewards
Different credit cards have different benefits. Some credit cards offer cashbacks or rebates with dining transactions, while some have travel rewards. Other cards offer discounts at hotels, waived checked baggage fees, and even insurance for your high-end gadgets. Take note of the benefits that your credit cards have to offer and keep these in mind as you spend using your credit cards. 

Yue with his Nintendo Switch OLED, which I paid for with my credit card. 

Opt for installment
Credit cards can come in handy if you're planning to buy high-ticket items such as electronics and household appliances. Purchasing via a zero interest installment plan allows you to spread your payments, stretch your money, and manage your cash flow better.

Pay in full and on time
This is the golden rule when it comes to credit cards. While credit cards come with rewards and benefits, they also come with interest rates if you don't pay on time. 

Paying only the minimum amount incurs interest to your balance in each month until you have paid in full, and this could be more costly in the long run. To avoid late payment fees, interest charges, and those annoying reminder calls, make sure to pay the full amount on or before your due date.

There's nothing to be afraid of if you know how to use your credit card wisely. With proper understanding on how your credit card works, you'll gain convenience, a smooth cash flow, a solid credit score, and even save money in the long run. 

11 replies:

AiringMyLaundry said...

Yes I am always careful with a credit card. If I can't pay it off the following month, I won't use it.

Anonymous said...

These are all great advice! While my main card of use is a debit, I’m still wary of using it sometimes for these very reasons. Even though credit cards are very different. Thank you for sharing! I’ll definitely keep them in mind!

-Whitney Stewart

Renee Franklin said...

That is where my brother got into trouble with his. He did not pay in full. He would max it out and then try to pay off. It got out of hand and he eventually just cut up the card.

Melanie Edjourian said...

It's important to keep on top of credit card use. If you are careful and use those with 0% fees you can avoid paying anything additional provided you can pay them off soon.

Monica said...

My husband is anti credit cards. I really want to get the Southwest Airlines one to rack up flight points!

Lynndee said...

Such great tips. We make sure to monitor our purchases. -LYNNDEE

Beautiful Touches said...

Great tips on good credit card use practices, also I've read in a lot of places that not exceeding using more than 30% of the total credit line can be useful as well!

Richelle Milar said...

This is a really great and very informative post! I’m gonna share this with my sister who is planning to get a credit card

Gust si Aroma said...

These are great tips that help a lot. I need always to remember them!

Laura JL Books said...

These are great tips that I will keep in mind. I am very careful when I use my credit cares. Thank you for sharing them wth us.

Christy G said...

I was doing well, in the beginning, to pay it off monthly because I was trying to build my credit up. But with COVID twice and not earning enough for some months, I ended up in the hole. I'm working to get out of it but it's hard.