Advertising
Advertising

Avoid these 5 Dumb Ways of Using a Credit Card

Avoid these 5 Dumb Ways of Using a Credit Card

A lot of consumers these days take advantage of credit cards for their financial transactions. Some of them do not just own a single credit card, as they are equipped with multiple credit cards that they can swipe alternately for purchases and payments.

This way, there would be no need for them to bring a lot of cash as they are willing to deal with the interest rates from credit card companies. Even though there are already a lot of people who use credit cards, there are still people who do not know the proper ways of using it and are taking advantage of it the wrong way. Here are 5 things that you should completely avoid when using a credit card.

1. Not Paying in Full

There are credit card users who do not pay their billing statements in full just because they do not want to deal with loose change involved with it such as the centavos. What these people do not understand is that the unpaid amount will be charged with interest for the next month and this will accumulate on the statement balance on that same month.

Advertising

The amount is not that much that is why it is often overlooked, but if you are trying to be thrifty, then you are actually wasting some dollars just because you don’t pay your credit card in full.

2. Not Aware of the Terms and Conditions of the Credit Card Provider

Most of the credit card companies work the same way but there could be minor differences in their terms and conditions, that could spell a major factor towards the way you use your credit card.

This is why it is important to completely understand the terms and conditions that your credit card company have before even taking advantage of their service. A lot of people have gone bankrupt due to this simple ignorance.

Advertising

3. Not Using Your Credit Card at All

There are people who do not use their credit card at all in order to avoid paying for interest rates and other fees that go along with credit card usage. However, this is not a smart idea at all because if your credit card becomes inactive for months, then the credit provider could deem your account inactive and eventually close your credit line.

This may not seem like a big deal but this move will actually reflect into your credit report and will eventually affect your financial situation in the long run. Using credit has several benefits. You can get several cashback offers by using the credit, while the credit just sitting there is not going to benefit you in any way.

4. Maximizing your Credit Limit

Getting the most out of your credit card can also hurt your credit report. Even if you are capable of paying that amount, creditors would still think that you do not have cash ready and you’re only resorting towards credit for your finances.

Advertising

The interest rate that would take its toll on your monthly balance would also be outstanding. If you are only smart enough the money that goes out to your interest rates should have already been considered as savings.

5. Using the Credit Card for Cash Advance

Most credit companies feed off users who use their credit cards for cash withdrawal. The interest rate this way is much higher compared when a credit card is swiped for goods and other transactions. Using your card much like a debit card is not advisable and is very risky. Only resort to this method in case of emergencies or else you would get used to this method and use it frequently which can take toll on your finances.

Using a credit card can be a form of privilege given that there are companies who offer cash back rewards when you keep on swiping them. However, monitoring your credit account along with your finances is more important just to make sure you are still on track when it comes to your credit card usage.

Advertising

Featured photo credit: Lifestyle via blog.tugo.com

More by this author

6 Reasons Why French Press Makes the Best Coffee 9 Things To Remember If You Love Someone Who Doesn’t Easily Show Affection 12 Ways To Earn More Money While You Have A Full-Time Job 7 Steps to Reduce Your Laptop’s Fan Noise & Increase Speed 7 Ideas To Decorate Your Home Using LED Strip Lights

Trending in Money

1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

Read Next

Advertising
Advertising
Advertising

Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

Advertising

Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

Advertising

I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

Advertising

Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

Advertising

So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

Read Next