A credit card is arguably one of the safest ways of making payments both online and offline. This is because it spares you from the risk of having to carry huge amounts of money when shopping or traveling. In fact, every household in America has more than one credit card. Regardless of the convenience that they offer, credit cards have put many people in financial debt. Those who are unable to pay their credit card debt end up having a poor credit score, which means that they can’t qualify for a loan or any type of financing for a home or a car.
However, a credit card is not evil like we are made to believe. It’s just like electricity, you use it well, you will wear clothes that are free from creases, use it to cook meals and enjoy a cold drink from the fridge. But if you use it the wrong way, you risk being electrocuted. There are actually so many benefits of using a credit card. The only problem is that most people don’t know how to go about it. Here is a list of how you can utilize your credit card.
1. Get a Card with Low Interest Rate
What most people don’t understand is that a credit card is a loan like any other. The credit card company therefore makes money by charging you a small percentage either every month or at the end of the year. As an economic conscious individual, you should select a card that offers the lowest interest rate so that you don’t end up paying a lot of money. You should actually hunt for interest free credit cards. The advantage of these cards is that they offer an interest exemption period of between 6 and 7 months. You can therefore save a considerable amount of money by utilizing such an exemption. Some credit card companies use this exemption as a strategy to attract more customers.
2. Avoid Spending Beyond your Credit Limit
Every credit card comes with a limit that specifies the amount of money that you can spend in a month or a year. By the rule of thumb, you should try your best not to exceed this limit. In fact, trouble starts once you exceed your credit limit because you eventually get overwhelmed by the debt. This means you have to develop a budget for tracking your expenses. Besides that, you should avoid using the card for small payments because you can afford to pay them in cash.
3. Commit to Paying your Bill Monthly
Paying your credit card debt on time helps in boosting your credit score. When the credit card company notices that you don’t delay in paying your monthly debt, they will definitely reward you with a credit limit increment. And although you have several cards, you should try creating a balance in how you use them. The worst mistake you can make is to allow either of the cards to be dormant. This is because they will be deactivated by the credit card company. In fact, you should try to use every card for the longest duration possible. This is because it helps in building a convincing credit report that you can use in future when applying for a loan.
4. Utilize Credit Card Rewards
Since there is stiff competition among credit companies, each of them offers rewards in an attempt to attract more customers. Some of the rewards include cash backs, hotel loyalty points, frequent flyer miles and free travel insurance among others. After signing up for a credit card, you should check the rewards it offers and utilize them to the maximum. If you are lucky, you will be able to enjoy free flights and free meals and accommodation in world class hotels and restaurants.