When it comes to credit cards, a lot of people have misconceptions that can later manifest as their greatest financial nightmare. Often young people who get their first credit card have a hard time grasping the concept or the financial dynamic behind the card. Thinking of it as free money or debt that you don’t have to worry about any time soon is a big mistake.
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Instead of blindly following what your heart tells you to do with a credit card, we’ve prepared a list of the dos and don’ts of owning a credit card.
Getting a Credit Card
If you’re intimidated by the thought of owning a credit card, then you need to realize that that’s a positive sign. It takes someone responsible who can weigh their options properly to efficiently use a credit card. The benefits you get with a credit card definitely outweigh the disadvantages if you know what you’re doing. Unexpected expenses that can come up suddenly without prior notice are best dealt with using a credit card, but this doesn’t mean that you should treat a credit card as an emergency fund instead of creating one with your actual money.
You should be quite aware of the things that affect your credit score. Mistakes that have big impacts on your credit score should be avoided as much as possible. You may also need some help finding out your credit score accurately before you get to access a good line of credit. It’s best to use a service that pulls your credit score from the major credit bureaus to avoid any discrepancies in the information.
Don’t Pay the Minimum
Banks and lending institutions know how to make their offers tempting so their customers open a huge line of credit based on their advertising of the minimum required amount to be paid. When you purchase something expensive, don’t try to think about the minimum charges and think of it as a total. Having a big line of credit may make it harder for you to curb huge purchases. Interest is calculated through an annual percentage rate, which means that leaving it to pile up is a recipe for disaster. Prioritize paying the entire debt in one or two months because there are no tax deductions like those on mortgages and other loans.
Look for Other Cards
You may have already had a credit card for years, but have you ever thought whether you’re getting a bad deal? A lot of people are under the wrong misconception that credit cards don’t differ that much except for the allowable balance. But the truth is every lending institution offers a wider collection of credit card plans than you’d think. The most popular two types of cards are reward cards and 0%-APR cards. The first reward the owner for using the credit card in their purchases, allowing them to rack up points that they can exchange for different rewards. The latter is a card that allows its owner to not pay any interest on their purchases as long as the full amount is paid on a month-to-month basis.
Don’t Miss Deadlines
A big mistake that many credit card holders make is not taking deadlines seriously. Repayment due dates are not to be missed at any time. Not only can this result in late fees, but there is also a good chance for it to appear on your credit report, negatively impacting your credit score. Every time you are late on a payment it’s written and highlighted in your credit report, making it very difficult to increase your line of credit or get any deals in the future. Make sure to track your deadlines properly to avoid missing repayment as much as possible.
Use Debit Cards If Possible
Since we’re almost living in a cashless society, using a card for all your purchases instead of carrying cash around makes sense. But a credit card isn’t the only way to do so; you can use a debit card instead. When you’re spending from a debit card, you know you’re spending money that you own. This means that you’ll be more accountable in your purchases, in addition to being at no risk of defaulting or missing a payment. You should also have an idea about what is a derogatory mark.
It’s important to understand that the bigger the limit is, the more responsible and thoughtful you have to be when using your credit card. This doesn’t mean that you shouldn’t use it at all; you just need to find a balance, which can require some effort and research. A credit card can be your greatest ally if you know what you’re doing with it.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
Thank you for such info it really help to us to understand about credit card