Lots of people think negatively about credit cards but they can be an incredible useful financial tool, if used correctly.
Many cards provide travel insurance, identity protection, reward points, cash-back, and more. If you carry a balance, your number one goal should be to get the lowest interest-rate possible. If you make monthly payments, then selecting a card becomes more difficult.
A few tips for selecting a credit card:
Check your credit report at least once a year.
Look at past statements and figure out how often you carry a balance, how much interest you’ve paid, and how often you’re late with payments.
Don’t settle on the first credit card that is offered in the mail or over phone.
Use the Internet to research your best options; you’ll even see ads with great offers.
Think of getting different cards for different types of purchases. Some cards give two or three times more reward points for some purchases. Airline card is a good example for travel purchases.
Do's of Using Credit cards
Make wise decisions about purchasing items you need versus those you simply want. We’ve all used the word “need” to describe something we really just wanted badly. Using your credit card responsibly means recognizing which things you need and which you just want.
Let your creditor know in advance if you won’t be able to make your monthly payment on time. The worst thing you can do is simply forgo your credit card payment, no matter the reason. Most creditors will assist you if you let them know before you miss your payment. Simply call your creditor, briefly explain the situation, and ask that any late fees be waived.
Stay within 30% of your credit limit. A large part of your credit score considers the amount of debt you have. Keeping your balances low helps you maintain a good credit score. Not only that, lower balances are easier to manage than those that are higher.
Negotiate a lower interest rate. Especially if your current rate is higher than offers you receive. Your interest rate determines how much you pay for carrying a balance on your credit card. Evaluate the interest rate on your credit card periodically to be sure you are getting the best deal possible
- Don't Use to make everyday purchases. Items like food, clothing, and gas shouldn't be purchased with a credit card. Using your credit card as a substitute for cash is a habit that can quickly lead to debt. For ordinary purchases, leave your credit card in your wallet and use cash or debit card instead.
- Don't Get into the habit of making minimum-only payments. Making only the minimum payment each month increases the amount of time it will take to pay off your debt. It also increases the amount of interest you end up paying. To pay your debts off quicker and cheaper, you should pay as much as you can on your balance each month.
- Don't Use to buy things you can’t afford. Living a borrowed lifestyle is the quickest way to get into debt. If you can’t afford a purchase today, chances are you won’t be able to afford it tomorrow, or even next month.
- Don't Closeout a credit card without knowing how your credit will be impacted. There are times when closing a credit card can hurt your credit score. Avoid closing cards that still have a balance or those that make up a significant amount of your credit history.
- Don't terminate the dealings with any agency or bank without getting the confirmation of having paid the dues on your card.
- Don't exceed your repaying capacity which depends on your income and expenditure pattern.
- Always keep track of the transactions done on the card, so that any entries not initiated by you can be traced and taken up with the issuing agency for rectification promptly.