There are several things to keep in mind while using a credit card. Not all do's and don'ts aim to keep collection agencies from bothering you. Rather, it's an early practice that will let you be financially responsible for life.
In the grand scheme of things, using your credit cards diligently is beneficial to the economy. By gaining a good credit score, you get to have more purchasing power, which in turn, helps businesses. This circular motion can even present you with better financial opportunities, such as lowered consumer prices.
However, that's if all credit card users are aware of the 6 important do's and don'ts.
6 Do's in Using a Credit Card
A good credit score standing allows you to experience otherworldly things non-CC users cannot have, like easier access to obtaining a VISA, traveling, and opportunities that can be considered luxurious. With these do's from Consolidated Credit, you have the best financial and lifestyle health to look forward to.
1. Check SOA and Pay On Time
Statement of Accounts, depending on when it's stated to be received, are important to review regularly. This way, you are on track with your expenses, and no unauthorized charges were included. In SOA, you will see the exact breakdown of your outstanding balance and the corresponding due date.
2. Pay Outstanding Balance
Now, there's an option to pay the minimum amount in your SOA. But don't fall for this trick. Unless you fell short in budget, pay the exact outstanding balance reflected on your SOA to avoid interest and late payment fees, which could add up over time.
3. Use For Needs, Not Wants
Think of credit cards as bills rather than borrowed money. This mindset will set your brain into saving mode, similar to how you save electricity by visiting Mother Nature instead. While it's understandable to experience credit rewards, buying more will only lead to unattainable monthly payments you will soon be unable to pay.
4. Buy What You Can Afford
There's a reason why you have a credit limit and maxing it out on the first purchase or buying things beyond your monthly salary will cost you a lengthy installment fee. Before you know it, you're already seeking loans to pay your outstanding balance, which can drown you in debt.
5. Choose Interest-Free Installment Method
Would you rather pay after 3 months with interest or pay the next month with no interest? The answer should always be the latter. This way, you can already slash your outstanding balance off your books and use your credit card for other purchases.
6. Use it For Yourself
There are cases of credit card users in massive debt who were unable to pay their balances due to purchases made by family and friends who already run out of their financial responsibility. No matter the amount, the financial accountability will still befall you, and it's not exactly rewarding to pay someone else's debt.
Read More: 10 Ways on How to Save Money This 2024
6 Don'ts in Using a Credit Card
Based on Honor Bank's don'ts in using a credit card, some practices were often mistaken as a strategy. However, most came from rushed and mismanaged decisions that were proven to have caged users into debt.
1. Don't Feel Pressured
The best don'ts to use a credit card is to not have one when you really won't need it. Instead of listening to salespeople, take this time to carefully consider whether the monthly expense you will pay is aligned with your current financial standing and purchasing habits.
2. Don't Ignore Red Flags
Took out a bank loan? The next step, just after you settle your balance, is to pay attention to signs of accumulating debt. Collection agencies are brutal and while they can't imprison you for life, they can employ other legal tactics to intimidate you. Besides, it's the peace that you'll be missing out once you run into your first financial issue.
3. Don't Be Comfortable with Late Payments
Sometimes, there are emergency expenses that will empty our savings to a point that we can no longer afford to pay on time. This can be manageable but don't do it all the time, otherwise, your balances, late fees, and interest charges, will only pile up and make it much harder to pay than the first month of committing to a late payment.
4. Don't Open Multiple Credit Cards
Having multiple credit cards is not a flex that you think, because it also means multiple financial obligations. And if you decide not to use some of them, that will only affect your credit score. Instead, focus on managing one or two credit cards responsibly.
5. Don't Max Out Your Card
They say credit cards offer the best advantages when you maximize them. But the truth is it will only reduce your credit use ratio and hurt your overall credit score. Try to keep your balance well below the credit limit by opting for cash + credit options.
6. Don't Apply to Another with a Recurring Balance
If you have an existing balance on a current credit card, don't attempt to apply for a new credit card for your next purchases. This not only leads to higher interest charges, it can also further send you into debt.
To sum up, do shop around by all means using your credit card. But, only if you are capable of paying it at present. Don't rely on your upcoming salaries since there are uncontrollable forces that could come. At the same time, focus on following whatever is in the statement of account you received. Using your credit card doesn't have to be stressful, and instead, it should give you further lifestyle benefits.
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