Thursday, March 16, 2023

How To Use Credit Card Effectively

Don't Miss

How To You Use A Credit Card To Make Money And Earn Extra Cash

How To Use Credit Cards Effectively

Chris Muller|

Modified date: Aug. 18, 2021

There are 364 million credit card accounts in Americamore than the entire U.S. population according to American Banking Association statistics for the year ending December 2017. This is a clear indication that most credit card holders in the U.S. have more than one credit card.

However, this may not be a bad thing as many people would want us to believe. One such person is the self-made billionaire, Mark Cuban who has been on record alluding to the fact that people who use credit cards dont want to succeed.

This couldnt be further from the truth. Although credit card debt has hit the $1 trillion mark, there are many people, including myself, who use credit cards responsibly. Heres more on why I use credit cards and why you should do the same.

Whats Ahead:

Access To Extra Finance

One of the main reasons people get a credit card is because they want access to a line of credit. A credit card allows you to spend money you might not have in your bank account at that very moment. It gives you the freedom to buy what you want and need without restricting you to your bank account.

This extra line of credit can become especially useful in emergency situations. You can deal with the problem right away and not have to wait until payday. It is very important to highlight that a credit card isnt free money. You have to pay back everything you spend. So its good to be careful that you dont fall into the trap of overspending and putting yourself into further debt.

Dont Share Credit Cards

You need to be fully responsible for everything that is charged on your card. Sharing your credit card will most likely leave you with unexpected bills. Unless its an emergency, never share a credit card.

This may sound crazy, but you have the option to add someone as an on your card. This is still considered sharing a credit card because the authorized user can charge on the account but they arent technically obligated to pay it back. Unlike a co-signer, an authorized user is merely thatsomeone who can use the credit line.

Also Check: Can I Extend My Tourist Visa In Usa

How To Use A Credit Card To Earn Cash Back And Rewards

Earning rewards from a credit card is the fun part. But first, you should consider what your top spending categories are, then pick a card that will provide the best returns for you. Everyone’s spending habits are different some people may spend a lot on travel, while others only spend on groceries or takeout.

Habit #: They Pay Their Bills In Full Every Month

How to use your credit card effectively

One reason you want to have an organized credit life is so you always know where you stand with credit card balances. The goal is to pay off the balance every month. There’s really no middle ground here. You have to have the self-discipline to stop spending when you reach your budgeted limit. If your past history suggests that you will keep spending, don’t use credit cards.

And give yourself a pat on the back for honesty. The people who are the most successful at managing their money are the ones who know their strengths and weaknesses and make decisions accordingly.

Don’t Miss: Can Vanilla Visa Gift Cards Be Used Online

How Do Secured Credit Cards Work

Here is how secured credit cards work:

  • You apply for a secured card from a credit union, bank, or credit card company.
  • The credit union, bank or company checks your credit history.
  • If your application is approved, you pay a fee to use the card for a year.
  • You deposit money in the bank. The deposit usually is $300-$500.
  • Sometimes the amount you deposit is your credit limit. But sometimes your credit limit is less than the amount you deposit. Your credit limit means the amount you can spend on the card.
  • You use the card to buy things. You can spend only up to your credit limit.
  • You deposit that amount back into your account. You can spend that money next month.;
  • The secured credit card company gives information to the three credit reporting companies about the way you pay for your card.

Always Pay Your Balance On Time

Going back to all the previous items, credit cards must work your advantage. It should not be a tool for you to be in deep debt. The perks I mentioned such as point system, cashback, and increase of credit limit will only take effect if you pay on time. Always remember that carrying a balance will only lead to debt and paying interest to your bank.;

Don’t Miss: What Is The Best Credit Card For Military

Get Fraud And Purchase Protection

One of the benefits of credit cards is fraud protection. If your credit card is hackedwhich happens pretty oftenmoney isnt coming out of your bank account, and you dont have to pay for bogus charges.

While debit card fraud is eventually refunded, that money still comes out of your account at first. This is one of the big reasons we think you should rethink using your debit card as your primary form of payment.

For example, I have a friend who put a $1,000 deposit on a piece of furniture he never got because the company went out of business. They took his deposit, but because he put it on the credit card, the bank refunded it.

Watch Your Credit Utilization Ratio

How to Use A Credit Card Effectively

Your is the percentage of your available credit limits that youre using. Its one of the most important factors that affect your credit score. Ideally, you want to keep your credit utilization at or below 30% by paying off as much of your balance as you can each month.

To calculate your credit utilization ratio, add up the balances on your cards and then add up your credit limits. Divide your total credit card balances by the total credit limits and multiply by 100. For example, if you have a card with a $5,000 credit limit and the balance is $2,500, your credit utilization is 50%.

Also Check: What Is The Best Credit Card With Low Interest

Youre Our First Priorityevery Time

We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.

What If I Cant Get A Loan

There are other ways to borrow money. Some people go to a payday lender. Some use the title to their car to get a loan. Some people pawn things.

These other ways to borrow are expensive. They almost always cost more than going to a bank, a credit union or a store. Some people have problems with debt after using these ways to borrow. The charges can be very high. It is hard to pay the money back and get out of debt.

You May Like: How To Use Stolen Credit Card Online

Rule Of Thirds And Credit Limit

Not to be mistaken with the photography thumb rule, it is recommended that only a third of the available credit limit should be utilised on an average. Exceeding 40% of the credit limit can adversely affect your credit score. You can combine the use of a debit card to keep this percentage within the 30-40% range.

Where Can I Get A Loan

How to use Credit Card Effectively

Most banks and credit unions offer loans. To get a loan, you must apply. The bank or credit union will check your credit.;

The bank and credit union use your credit history to decide:

  • if you will get a loan
  • how much you will pay for the loan

You might have a bad credit history, or no credit history. That means you might not get a loan from a bank or credit union. It might take time to improve your credit to get a loan.

Sometimes, you can apply to a store for a loan. You can use a store loan to buy something from that store. These loans sometimes are easier to get if you have bad credit.;

Stores also check your credit history. And store loans sometimes have higher interest rates. A store loan might cost you more money than a bank loan.

You May Like: When To Pay Credit Card To Avoid Interest

How To Responsibly Manage Your First Credit Card

Simply opening a credit card doesn’t instantly improve your you actually have to use it. But until you feel confident in balancing all of your financial obligations, start small by using your credit card conservatively and checking your regularly so you can track your spending.;

If you’re using your credit card for everyday spending, try to charge no more than 10% to 30% of your credit limit on your card at one time. For instance, if your card has a $500 limit, try not to spend more than $150 each month. This will keep your debt-to-credit ratio;low and helps you get in the habit of only spending what you can afford to pay off each month.

Most important: Pay your bills on time. Making consistent, timely payments has the biggest impact on your score. Lenders are more willing to give you credit when they see a long history of on-time payments on your credit report. When you open your first credit card, it’s really important to start out practicing good financial habits: spending within your means and paying your bill on time and in full so that you never get dinged with;over-the-limit fees;or have to pay interest on the balance.

Understand How Credit Cards Work

Credit cards provide a revolving line of credit .

When you apply for a credit card, the bank looks at a number of factors, including your income, debt, and credit history.;Itll then decide whether to extend you a line of credit and how much of one. This is the maximum amount you can spend on your card before paying some of it off.;

How swiping a credit card works. Image credit: Visa

Every time you swipe your card at a store, hotel, restaurant, or website youre borrowing money from the card issuer and using more of your credit limit.

Insider tip

in several ways. Most notably, when you swipe, youre not withdrawing money from your bank;account; youre borrowing money from the credit card;company. Thats why credit cards help you build credit, and also why they can be an easy way to fall into debt.

You May Like: What The Best Credit Card For An 18 Year Old

How To Use A Credit Card In A Effective Way

November 29, 2020 by Rakesh Hansrajani

You all might be aware of some of them but may not be using it. I would recommend you to start implementing it and you can visit what is a credit card, how it works, how is credit limit determined or where can you apply for the same here. Here are some ways on how you can use credit cards effectively.

1. Stop Buying unwanted goods

Dont buy goods or services that you cant buy in cash. Lets say if you have 50,000 in your savings account or will get one before your billing date, do not purchase the product at the moment, as you might end up defaulting the payment and paying interest on it.

2. Convert to EMI

Incase it is important to buy it; you can purchase it and convert to EMI so that you are charged a lower rate as compared to 36%.

3. Avoid minimum due

Dont get in the trap of minimum due where you may think that you have made minimum due and will not affect your charges or credit score. This will affect a bit on your credit score. Also, you are charged for the interest on the remaining amount.

4. Make full payment

Please make sure you do make full payment by the due date. I would recommend you to pay it within a week of the bill generation date rather than waiting for the due date. This will ensure you make effective usage of your money by using your bank account money in a better and effective way.

5. Set AutoPay

6. Reward points

7. Cashback discount

8. Limit your usage

9. Dont withdraw cash

10. Improve/Build credit score

How To Use Your Credit Card Effectively

Tips to use a Credit card effectively!

There are a lot more aspects to credit cards than meets the eye. There are many things you could do to make sure youre getting the most out of your credit card. You could repay your credit card in full each month, avoid over-relying on your card, make sure to pay off your bill each month on time and more.

While we at Tippla will always do our best to provide you with the information you need to financially thrive, its important to note that were not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

Related articles

Recommended Reading: How To Tokenize Credit Card

Tips On How To Use Credit Card Wisely

A Credit Card is one of the most convenient ways to pay. If you use it right, you can enjoy interest-free credit, many rewards and freedom from cash.

Our 7 tips will show you how to use your Credit Card for maximum benefit.

Time your purchases

Each Credit Card has its own billing cycle. Once you are aware of the bill generation date of your Credit Card, you can maximise your interest-free period.

For instance, if you make a purchase just after your Credit Card bill is generated, you can enjoy up to 45 interest-free days, and sometimes more.

Pay your bill before the due date

When you use your;;regularly and pay your bill on time, your credit profile with the bank improves.

This can lead to a range of additional benefits, such as an increase in spending limit and great offers on Personal Loans and other financial products. Moreover, such actions will improve your credit score, which is extremely beneficial if your score is low.

Follow the rewards

Read your Credit Card booklet carefully, especially details about the benefits it offers and the;reward programme.

Your Credit Card could open the door to a host of discounts on products and services besides privileges such as free lounge access and priority services at airports.

Earning Reward Points on your Credit Card spends can accrue several benefits in the long run, from free flight tickets to movie vouchers to mega discounts on electronics.

Be smart about repayment

Use your card at trusted merchants

What Not To Charge On Your Credit Card

When deciding what you should charge on your credit card, consider treating your credit card like you would cash. Make it a habit to check your balance regularly, just as you would a debit card, so you avoid overspending. While some people like to use their credit cards for everyday purchases, others like to use it more sparingly. However you decide to use it, try to avoid putting these five charges on your credit card:

  • Your monthly rent or mortgage payment
  • A large purchase that will wipe out available credit
  • Taxes
  • Small impulse splurges

Also Check: What Is The Annual Fee For First Premier Credit Card

Getting Your First Credit Card

  • 1Get a credit card from your bank or credit union. If you’ve never had a credit card before, it can be confusing to figure out where to start. A good first step is to visit the bank or credit union where you have a checking or savings account and ask the staff about the possibility of getting a credit card. Most local financial institutions will be willing to offer credit to responsible, qualified customers.XResearch source
  • Note, however, that your eligibility for a credit card can be affected by the length of your financial history. If, for instance, you’re a young adult who’s only had a savings account for a few months, you may not meet your bank’s standards for a credit card. In this case, you may need to maintain your savings account for some time or settle for a special type of credit card called a secured credit card
  • 2Get a credit card from a credit card company. A bank isn’t the only place you can get a credit card many credit cards are offered by companies that operate just like any other business. You are probably already familiar with some of these companies, like Mastercard, Discovery, etc. These sorts of companies offer a wide array of credit cards to many different kinds of customers, though, like banks, they will only issue them to customers that they believe are financially responsible enough to pay for them.
  • Loans have you paid these off on time, or have you been late or defaulted?
  • Dont Open Too Many Accounts In A Short Period Of Time

    7 Tips on How to Use your Credit Card Effectively

    There are lots of credit cards with attractive terms and features but opening too many lines of credit at once gives you more places to accumulate debt. More credit cards to keep track of also makes it difficult to keep track of your spending and pay dates. Plus, opening too many accounts at once could negatively impact your credit score and you may be denied if you open multiple cards within a few months.;

    When used wisely, a credit card can help you be financially secure and establish solid credit. Stick to this guidance, and youll avoid overwhelming credit card debt and feel more financially secure.;;

    Looking for a credit card that meets all your needs?;Make an appointment;with one of our bankers to explore your options. Learn more about how you can earn 25,000 bonus points and pay no annual fees when you use the Altitude Go credit card.

    Read Also: Does Td Bank Have Visa Gift Cards

    More articles

    Popular Articles