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Credit cards can be a valuable financial tool if managed properly. They allow you to make purchases without paying out of pocket, earn rewards for your spending, and establish a good credit rating. Yet, they can also be double-edged swords—if not used responsibly, you’ll probably be in a mountain of debt for not practicing good credit card management.
The good news is that mastering the art of credit card management isn’t rocket science. There are plenty of simple and effective ways to stay out of debt and get the most out of your credit cards. Here are a few tips to help you do just that:
Pay off your balance in full every month.
The golden rule for managing your credit cards is always to avoid carrying a balance from month to month. This means you should pay off your entire balance every time you receive your bill, rather than just making the minimum payment or carrying over some of it to the next month.
This way, you won’t be charged interest, late payment fees, or other charges that can add up quickly and put you in a financial hole. Plus, you’ll have a better credit score that may even qualify you for a black credit card, which typically has the best rewards and benefits.
Set spending limits and stick to them.
Credit cards are great for making purchases when you don’t have the cash on hand to do so. But keep in mind that the money you’re spending isn’t free—it’s borrowed that you will have to pay back with interest.
So, while there are a lot of benefits to using credit cards, stay away from overspending and practice the discipline of delayed gratification to keep yourself safe from falling into a debt trap. Instead, set a monthly credit card spending limit and stick to your budget. Some ways to effectively stay within your means are tracking purchases, setting up alerts on your card account, and using a budgeting app.
Take advantage of rewards programs.
If you’re going to use a credit card, why not get something back in return? Most credit cards offer rewards programs that allow you to earn points, cash back, or other perks for your spending. Take advantage of these offers by finding a card matching your spending habits and using it as much as possible for purchases.
For example, if you travel a lot, look for a card with bonus miles or hotel discounts. Or, if you like to shop online, choose a card with cash back on e-commerce purchases. The goal here is to find a card that will give you the most bang for your buck.
Avoid cash advances, if possible.
While credit cards are great for buying items, they should not be used as a source of cash. Most credit cards charge hefty fees and interest rates on cash advances, making them one of the most expensive forms of borrowing. Not to mention, the payments on cash advances are usually due right away, and you may find yourself in a difficult spot if you’re unable to pay it back quickly.
Thus, avoid cashing out from your credit cards unless there is an absolute emergency. Instead, look for alternatives such as taking out a loan from a bank, asking friends or family members to lend you the money, or accepting freelancing gigs to make some extra cash.
Set up automatic payments.
With thousands of things to remember in life, it can be easy to forget when your credit card payment is due. Yet this is a costly mistake, as even one late payment can damage your credit score and lead to hefty late fee charges.
Setting up automatic payments is a great way to steer clear of late payments and other credit card-related hazards. This way, you won’t have to worry about manually making monthly payments, as the money will be deducted automatically from your bank account—ensuring that you never miss a payment and have to deal with its consequences. Just make sure you have enough funds in your account to cover the credit card bill and set up reminders a few days before it’s due so you can check on that.
Monitor your credit card activity.
Finally, good credit card management also entails keeping a close eye on your credit card activity and safeguarding your accounts from fraud. That means regularly checking your statements for unauthorized purchases and other suspicious activities. Additionally, it involves logging into your account frequently to verify that your credit scores are in good shape and ensure everything is accurate.
In case you notice any suspicious activities, contact your credit card issuer right away, as they can help you investigate and correct any issues. And, if your credit card is ever lost or stolen, report it immediately and request for the cancellation of the card before any fraudulent charges can take place.
Conclusion
Overall, credit cards are your financial friends, so long as you use them responsibly. But if you don’t practice good credit card management, they can turn into your worst enemies in a hurry—leaving you with unmanageable debt and damaged credit scores. Thus, it pays to be proactive and practice the tips for staying debt-free outlined above. With just a bit of effort, you can make sure your credit card usage helps rather than harms your finances going forward. Good luck!