The best ways to use a credit card help to keep your financial health in check. Credit cards can be very handy and beneficial when used smartly. They can also be a cause of trouble if used erratically.
A credit card is like a contract between the card holder and the financial institution. The card holder can use the funds from the financial institution, based on the agreement that the card holder will repay the institution a minimum amount by a set time. To avail this convenience, the card holder is charged interest on the funds used, unless the card holder pays the lender the full amount within the set period of time.
Know The Credit Card Terms
There are a few things to be aware of while getting a credit card. This would also help you choose the best option customized to your needs.
1)Annual fees: Credit card companies charge you for their service in the form of annual fees. Evaluate your options and choose the card whose charges are suitable to your needs.
2)Interest rate: Find out the amount of interest that will be charged if the monthly payments are not paid in full. . Late repayments on credit cards can prove very costly due to a high interest.
3)Payment terms: Make sure to find out how long you have before you have to make a re payment. Also, find out if there are interest-free periods for card holders who have paid the due amount in full. Check if you have easy EMI conversion options. This can prove very helpful in case of big expenses.
4)Credit limit: The lender decides your maximum credit limit based on various factors including income and living expenses.
Best Ways to Use a Credit Card
Make Payments: When used smartly, a credit card can become a simple method of payment. With most credit cards you can avoid paying interest charges if you make your payment in full. Therefore, you can enjoy several benefits like making purchases that can be paid off around 25 to 55 days later, at no additional cost.
Earn Rewards: When you opt for a reward card you can earn points, cash back or miles for the purchases you make, which you would have made anyway.
Substitute for a Car Rental: We all know how expensive rental car insurance can be. To avoid having to pay these expenses, you can use your credit card. Almost all credit cards come with no-cost collision damage waiver policy. However, make sure you activate this coverage and rent cars that are covered by this policy.
Avail Sign-up Bonus: Take advantage of the fact that the credit card business is one of the biggest and most competitive businesses. Companies would offer great rewards to increase their business. Check for the benefits you can avail when you want to get a new credit card.
Build Credit History: Building a good credit history can be extremely helpful when you need bigger loans in the future such as purchasing a house, or a car. Taking credit and never missing a payment is an easy way of building a good credit over time.
As a word of advice, avoid using credit cards when not necessary. Use one or two credit cards. Owning too many credit cards can make it difficult to manage repayments. Avoid skipping payments, and try not to get into the habit of only making the minimal monthly payments. Learn about the dos and don’ts of using a credit card to avoid financial woes in the future.