10 Ways to Use Your Credit Card Smartly –Credit cards can be a handy way to pay in cases when you don’t have cash on hand or if you’re trying to avoid using your debit card and spending more money than you have in your bank account.
However, they can also be risky if you use them irresponsibly—such as making charges you can’t afford and going into debt.
To use your credit card responsibly, follow these 10 tips to make sure that your spending doesn’t go overboard and end up costing you financially.
10 Ways to Use Your Credit Card Smartly (Without Going Into Debt)
1) Consider Cash Back
Cashback is a great way to leverage your credit card, especially if you’re not carrying a balance on your account. If you have a cash-back card, think of it as a rebate or discount on your purchase.
When you buy something with a cash-back card, the store will give you some money for using it, just like an instant discount. You’ll know how much of an instant discount by looking at the terms and conditions for your card, but generally 1-2% cash back is pretty standard.
Generally speaking, the more you spend on things that are eligible for cash back with your credit card, the more money you’ll get back in return.
2) Get Rewards
Rewards are one of the most overlooked benefits of using a credit card. There’s nothing wrong with earning points or miles for your everyday spending, and a lot of cards offer cash back or other rewards. But you have to know how and when to use them.
For example, if you sign up for a card that offers 2% back in groceries, but never grocery shop, you’re losing out on free money. Also, if there’s an annual fee, make sure the rewards you’ll receive outweigh it.
Lastly, if you carry over debt from month-to-month with your card because you don’t have enough cash on hand, then it defeats the purpose of having a credit card in the first place – which is to avoid carrying debt!
Also Read- 10 Secrets to a Successful Budget
3) Balance Transfer Cards
Balance transfer cards are one of the best ways to use a credit card without going into debt. Balance transfer cards have lower interest rates and the higher your balance, the more they can save you on interest.
Plus, it’s easier than ever before to do a balance transfer with all the credit card comparison tools out there that will help you find a good option.
If you’re not careful, balance transfer cards can be easy ways of slipping back into debt- especially if your goal is to spend more money than what you have available in your bank account at any given time.
It’s important to be aware of when it’s appropriate and when it’s not appropriate to use a balance transfer card for new purchases.
4) Pay on Time
If you want to use your credit card smartly, the most important thing is never to miss a payment. Paying on time will help you build a good credit history and improve your credit score.
You should also keep the balance on your card as low as possible – ideally, less than 30% of your limit. This will prevent you from having to pay any interest charges or late fees because you’re carrying a balance month-to-month.
And finally, don’t forget that if you take advantage of an introductory APR offer on your card, such as 0% interest for six months, it’s important that you pay off the entire balance by the end of the promotional period or risk being charged retroactively for all previous interest and fees.
7) Look Out For Fees
Chargebacks and other fees can add up. Make sure you know what all of the fees associated with your credit card are before using it.
For example, if you’re using a rewards card, make sure you understand how those points are calculated and how many points you need to redeem them for rewards.
You may find that there’s an annual fee or that your points expire after a certain period of time. There’s no point in earning rewards if they expire or get taken away after one year!
8) Live Within Your Means
It’s tempting to use your credit card for everything, but the best way to keep your debt down is to make a list of all the things you need and figure out how much you can afford.
You should also never carry a balance from month to month, which means paying off your full balance every month.
Finally, take advantage of rewards points or cash-back programs that can help offset some of what you spend.
For example, if you’re considering purchasing a new laptop for work but it’s more expensive than your budget will allow, think about whether or not there are any reward programs that could lower the cost by offering discounts on these types of purchases.
5) Keep it Simple
- Keep your credit card spending under 30% of your total monthly income.
- Always pay off the entire balance every month, and never carry a balance from one month to the next.
- Make sure that you know the card’s interest rate, annual fee, and penalty for missing a payment before you apply for the card.
- Pay attention to when your credit limit is increased or reduced, it may affect your ability to borrow money in an emergency if you’ve maxed out your available credit limit.
- Never charge anything on your card just because it has a low introductory APR offer.
- If you’re carrying debt on more than one credit account, consolidate them into one account with the lowest APR first.
- Be careful with store-specific cards: they may have lower interest rates but they also have lower limits and higher annual fees which can be detrimental to your finances long term
- Never use more than 20% of your credit line at any time; this will help you avoid going over your limit and incurring high fees
- Don’t sign up for store loyalty programs or offer points if they require you to charge something on their cards
9) Pick a Reputable Bank or Institution
One of the best things you can do with your credit card is use it responsibly. This is where a reputable bank or institution comes in handy.
A lot of people don’t know that they can use their credit card at some banks and not others, which might lead them to make some questionable purchases on the wrong card.
That’s why it’s always important to make sure you’re using your credit card from a reputable institution if you want to avoid going into debt or facing penalties for over-limit spending.