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If you don’t know how to use credit cards responsibly, the first experience with a credit card can often turn devastating. Understanding that there’s a limit to the total amount you can spend using a credit card is one of the basic things to keep in mind. You need to understand that you don’t own the amount you’re spending. Therefore, it’s easy to rack up a debt because you do not understand that it is money that you will be charged interest on.
Even if you’re a pro at credit cards, there’s no harm in keeping a few policies in your mind the next time you whip out your credit card at the store. Those tiny pieces of plastic are a lot of trouble, and it’s always good to stay safe, rather than be sorry.
Credit cards are easy money at your fingertips – and it’s hard to remember that it’s not your money, but the banks. Impulse shopping becomes easy with a credit card. One way to avoid falling into that death-trap is by leaving your card at home when you don’t intend to buy something. Unless you really need to make a big purchase, just discipline yourself to rely on your own money.
The bottom line is to remember to spend within your means, and this is a principle which serves well in avoiding debt, at any time, whether it be with your credit card or your monthly payment.
Your credit cards come at an interest. For every penny you spend using your credit card, your bank or provider charges you an interest on the total amount. Some providers charge you more, some less, and it often depends on your credit score. Whatever you do, do not let the bank trump you over 20% interest on your credit card.
In fact, by using the card smartly, avoiding debt and paying your bills on time, you could even improve your credit record in the long run!
You do not want to be settled with a debt racked up by your credit card. The best way to do this is to pay the full amount you have spent on the card at the end of each month. It is tempting to pay only the minimum amount due. However, each time you allow the balance to pile up, your provider gets to charge you an interest on it. This leads to a rise in the total due each month. This is the surest way to land in debt, and you don’t want that. Those letters highlighted in red can really spoil your day.
Your credit card has the provision for you to withdraw money from it, in case of emergencies. But there are always hidden costs involved in this sort of transactions. There is a transaction fee, of up to $5 per transaction, or for larger amounts, a percentage of the total amount withdrawn. And of course, there is the interest you are charged on the withdrawal.
All in all, you’re facing the bad end of the deal.
Credit cards offer you only one financial advantage – reward points. All cards serve reward points on the purchases you have made. The more you’ve spent, the higher the rewards. But as with all good things, reward points also come with a deadline.
If you do not use them up before a specific date, they become void, which means you cannot use them anymore. Different providers also provide different things – gift vouchers, products and, services. There are also several online stores which offer discounts and cash back on the credit cards of certain providers. Keeping yourself updated on this can save you big bucks. This is why we love credit card churning and manufactured spending. This allows us to generate massive amounts of points (in a responsible manner). This leads us to free travel around the world for relatively no cost!
The baseline here is that credit cards are not a God-sent gift. They come with their own perks and drawbacks. But if used responsibly, they can not only offer financial comfort in time of need but also serve to improve your overall financial record.
Author Bio: Millionaire Mob is a blog focused on things that we truly enjoy: Travel Photography, Travel Rewards, Passive Income, Dividend Growth Investing and Personal Finance advice. I hope to provide the best advice to help you learn and grow along the way. Join the mob of financial freedom experts and escalate your life. Follow us on Twitter @MillionaireMob2 or Instagram @millionaire.mob!