How to use credit card wisely ?

How to use credit card

In the year 2008, I had to take a course on a Credit card and get certified on credit cards.  I work in the tech sector, but my project was on credit cards. So I had to know how the sector works. Over the year working with financial companies taught me How to use a credit card, and I want to tell you a few basic things today.

First of all, consider credit card to be your friend. And if you choose your friend carefully it can be rewarding.

Why is credit card better than Debit card?

Credit cards offer you rewards, cash back or gift cards, most of the debit card do not.

  1.   Debit card directly transfers your own money to merchants account for the commission they earn is little, so they cannot really return any reward to the consumer. On the other hand, credit card charges a fee to settle amounts, and they can return their part of the profit to consumers in form of points/rewards.
  1.  You get around 50 days to pay off the debt without paying any interest, assuming you are not taking a cash advance. Debit card, if you are paying from an account that has some interest, you lose the interest.
  2. A credit card lets you dispute any fraudulent activity, a debit card does that too. But the amount to return to your account it takes a lot of time, with a credit card, you get the disputed amount next day or sooner.

How to use a credit card

Here are few do’s and don’ts and as long as you follow these credit card will remain your friend that won’t stop giving.

  • When you apply for the card to make sure your credit score is great and you are not going to get declined. If your application is rejected, you take one unnecessary hit on your credit report. How do you know if your credit card application will get approved? Sign up for credit karma, it will show you, your approval odds. Make sure you do not apply for a card with an annual fee.
  • Apply for a cashback or rewards credit card. And some cards have 5% cashback on grocery or 5% on online shopping period. Use those cards to maximize your cash back.
  • Try to keep usage to a minimum. Well, say your credit limit is $10000, try to keep your balance below $2000. Lower your balance, that will make your credit score better.
  • Just paying the minimum payment is not going to cut it. When I took my course, I learned that best consumer for credit card companies is those who just pay the minimum balance. You end up paying a massive interest rate, maybe 20% or more on the credit card loan.
  • In case you are not being able to pay off balance, try balance transfer. There are cards those offer you 0% apr balance transfer for a year or so, that is enough interest-free period to pay off the credit card. But, you have to have the credit score to be eligible.

Bonus tip

  • The points above are enough to tell you how to use a credit card, but here is one bonus tip. Try checking your transaction details every couple of days. You never know when your credit card information gets stolen. If you cannot identify a transaction, you can dispute that online or by calling the bank.

So that’s How to use a credit card?

well, No. You are not supposed to be reckless with a credit card. You need to practice self-restraint. Use your credit card just instead of cash or debit card. Do not go on a shopping spree using your credit limit. So, try to pay off your balance in full every month. Develop a mentality, that credit card is an instrument to generate or get back portion of the money that you spend, and stick to it.

Author: pachubabu

I love trying different cuisine, hiking, travelling and blogging about personal finance ,investing & health/fitness

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