Owning a credit card can make you feel great because you will have access to cash at any given point in time. But, owning a credit card also comes with a lot of risks. One of the biggest risks ever is that of running into a debt trap. Yes, a credit card is a revolving line of credit, and if you fail to pay back the amount you spend, there will be an interest accrual over time. This interest accrual will eventually lead you into a debt trap. This article on tips for credit card owners is all about helping you become a financially responsible person.
So, if you want to learn a few tips on how to use your credit card wisely and build a stellar credit record, continue reading. We believe that you will gain a lot of wisdom from here.
Best Tips for Credit Card Owners
Tip 1: Select your credit card wisely
Let us start with zero. When you go out in the market to shop for a credit card, you will come across numerous choices. Believe us, when you get too many choices, you will face at least one of the following problems:
- You will encounter a problem of indecision. Yes, when people get too many choices, they cannot figure out which one suits them the best.
- You will fall for every card you see. You will want to own all the cards. This situation will arise because every card you come across will have some or the other significant advantage that other cards will not provide. In a case like that, you will feel like getting hold of all the cards because you will want the benefits of all the features that those cards offer.
- With too many choices in hand, you will most likely end up choosing a card that does not address your needs properly.
So, to ensure that you choose a card correctly, the first thing you need to do is to sit down and take your time to analyze your needs. Write down your needs in a piece of paper. For instance, if you fly frequently, you may want a credit card can help you save on your travel expenses. If you run a business, you should go for a business credit card that will help you save on your business purchases. If you are a student, you should opt for a card that will help you scoring cash backs or allow you to choose your repayment date, and so on.
A credit card should be able to address your needs and not your greed.
Tip 2: Compare different credit cards
You know what? Every credit card company will tell you that their product is the best you can get. Don’t be fooled. After all, which business in the world will say that someone else’s product is better than theirs? Instead of believing them, do your homework. Once you have figured out your needs, go ahead and search the internet for the best credit cards for your requirement. For instance, you may search for best Airlines Credit Card, or best credit cards for a balance transfer, or best students credit cards, and so on.
You will get many companies that offer credit cards that address your needs. However, your job doesn’t end there. Open up a spreadsheet on your computer (for example, Excel) and create a table to do a comparative study of the features that different credit cards offer. The basic features that you should compare are:
- Annual Percentage Rate that the companies are offering.
- Yearly or monthly fees that you need to pay for using a credit card.
- Introductory APR offer on balance transfers and purchases.
- The grace period that each credit card offers.
- Bonus points or cash back that each card offers.
- Foreign transaction charges that you need to pay in case you use the credit card outside the USA.
Do remember that the APR is one of the most important things that you need to consider. The higher the APR, the more interest you pay on your spending.
The grace period is yet another important aspect. Go for those cards that give you longer grace periods. The grace period is the time you get to repay your credit card debt without any interest payment.
Tip 3: Try to repay in full every month
Once you have a credit card in hand, you will most likely use it every month. If you do, try to repay the amount you use quickly. How quickly? When you get your statement, repay immediately. Even better, you should aim for repaying your debt within the grace period. When you repay within the grace period, you do not have to pay any interest. You will have to repay only the principal amount you use. Paying in full will also help you build a stellar credit score.
Tip 4: Never use your credit card for your greed
This particular tip is one of the most important tips for credit card owners. As humans, we are all prone to greed (subtly, ‘want’). There are too many things out there in the market that we want, but we do not need. Make sure that you are using your credit card only when you need it. Do not use it for buying things that you want to have. When you start purchasing things that you want, you will start building a debt because greed only increases over time. The bigger the debt, the greater the problems for you.
Tip 5: Limit your credit utilization ratio to 30% or less
Keeping an eye on the credit utilization ratio is important. What is this credit utilization ratio? It refers to the percentage of credit that you are using from the total credit limit on your card. For instance, let us assume that you have a credit card with a credit limit of say, $2,000. You should try to keep your credit spending to either 30% of $2,000 or less than that. So, 30% of $2,000 is $600. In any given month, try not to spend above $600. If possible, spend less. The lower the ratio, the quicker you can pay back your debt. If you have multiple credit cards, calculate the sum of the credit limit of all of them. This sum will be your total credit limit. Now, spend 30% or less of the total credit limit. You can spend more from one card and less from the other. But, the total credit utilization should be within 30% of the total credit limit of all cards taken together.
Tip 6: Avoid cash advances from credit cards
If you need cash, a credit card can provide you with the same. You can withdraw funds from an ATM using your credit card. Sounds interesting, right? Stop right there! NEVER opt for cash advances. Once you go for cash advances from your credit cards, you will have to repay the same within a very limited time frame, and if you fail to repay the amount within that time, you have to pay high interest, which is higher than the regular APR. On top of that, whenever you go for cash advances, there will be a hefty charge. As a matter of fact, most credit card providers will start charging interest the very moment you withdraw cash using your credit card(s).
Tip 7: Avoid minimum payments
This particular tip is more of a continuation of tip #3. Once you get your credit card statement, you will have two options – you can pay in full, or you can pay a minimum amount as decided by the credit card provider. Many people opt for paying only the minimum payment thinking that they will repay the remaining amount when the next statement comes. Trust us, when your next statement comes, the total amount due will be way bigger than you expect because the amount due from the previous month will attract interest and add up to the next month’s total due. The debt will go out of your control even before you realize.
Tip 8: Understand all the fees and read the fine prints
Possibly, one of the most important tips for credit card owners is – ‘READ THE FINE PRINTS.’ Most of us do not do this. There may be hidden charges stated in those fine print documents that you get along with your credit card. Banks and credit card companies will not tell you about those hidden charges while selling credit cards to you. There will be late payment fees or charges; there will be penalty APR, and so on. These hidden charges can be dangerous for your credit card debt and of course, for your overall credit score.
The tips above are the best tips for credit card owners on how to use a credit card properly. But, we are not done yet. There is more to say. So, carry on reading!
Tips for Credit Card Owners – Tips to Keep Your Credit Card Secure
The set of tips for credit card owners that you will read now will focus primarily on telling you how to keep your card safe. After all, security is an important thing, and you should try to avoid frauds. Let us begin.
Tip A: Never share your credit card details with anyone
When you take a credit card, your credit score comes into play. If you use your card without wisdom, you will be destroying your credit score. Now imagine what happens when someone else gets access to your credit card. That person can use the card to his or her heart’s content, and you will be riddled with debt. Never give the details of your credit card to your friends or family members, especially your friends, and your children and relatives. Essentially, do not give the details to anyone who can misuse your card, and put you in trouble.
Tip B: Never store your card details electronically
Computers and phones are prone to hacking. Yes, there are hackers out there who try to get unauthorized access to such details simply by hacking computers and phones. One of the easiest ways they take is to inject malware or spyware that can steal vital information and relay the same to the hackers. Try to keep your credit card details offline. Write down the details of your card on a piece of paper and keep it safe. Even better, try to memorize the details. No one can hack your memory.
Tip C: Never give your card details to anyone over the phone
Trust us; this is one of the most important tips for credit card owners that people happily ignore. There are fraudsters everywhere. They will give you a call and pose as people from the bank from which you took a credit card. They will ask for vital information on your credit card or even ask for OTP (One Time Password). Remember that banks and credit card companies never give you such calls. They already have all the details they need, and they do not have to call you to get those details.
You may now ask; how can a fraudster call and get an OTP when he or she doesn’t even know your credit card number? You need stand corrected here. Did you know that a person can guess a credit card number? Yes, it is possible! You can read about it here. Once they get hold of your credit card number simply by guessing, they will need the authorization pin and OTP to carry out any transaction. That is when they will call and try to scam you into revealing those details. So, never give the details to anyone who calls you. Remember, no bank or credit card company will ever call you to get the details.
Tip D: Do not use your card on suspicious sites
Today, e-commerce is an insanely popular thing, and scammers take advantage of this situation. They will try to capture your card details from insecure or suspicious sites. The golden rule of thumb that you should follow here is that you should never key in your card details on e-commerce websites that use HTTP protocol instead of HTTPS protocol. The ‘S’ at the end means that all the details you are providing are encrypted, and hackers cannot use data spoofing techniques to get hold of your card details. For sites with HTTP protocol, your data is out in the open and served to the hackers on a platter.
All the tips for credit card owners that you read in this article are vital. Whether you want to take them seriously or not will depend on you. We will only say that you should show some degree of financial maturity when you are using a credit card. After all, it is a loan, and you need to repay. If you don’t, you will become bankrupt, and that is something no one wants!