Credit card practices can save you from debt. The truth is, it’s very hard to stop using debt. Reports reveal that a lot of people are relying on their credit cards to make ends meet. While there was a rise in the number of people doing this during the coronavirus pandemic, it’s not the first time it happened. People have done this in the past – for a lot of reasons.
It could be because of job loss. Maybe it’s caused by an expensive medical treatment that a family member is going through. Any event in your life that compromises your finances could lead you to rely on your credit cards. The truth is it’s not a crime to do so. But you have to understand how to use a credit card properly so it won’t pose a threat to your finances. After all, credit cards are notorious for having a high-interest rate. If you let credit card debts accumulate, this can cost you a lot in terms of interest payments. But if you know how to use it, you can enjoy the perks of having a credit card without it posing a threat to your current financial situation.
How can you do that?
This is were credit card practices come into play.
Credit card practices to keep you from a huge debt situation
If you can learn to use your credit cards properly, you can save yourself from a huge debt situation. Here are the different credit card practices that you should implement to protect your finances.
Plan your credit card spending
It’s always a good idea to plan how you’ll spend your money. It’s what you need to become a better credit user. An unplanned credit expense is dangerous because you don’t have any idea how you’ll pay it off. When the billing statement arrives, you don’t know what to do or where you’ll get the money from.
If you plan how you use your credit cards, you can make sure your expenses are aligned with your budget plan. Since you’re looking at your budget before you use your credit card, you’ll know your limit. You’ll know how much you can afford to pay with everything that’s going on. It’s easier to control your spending if you know the current situation of your budget. If it’s not planned or you haven’t consulted your budget, don’t buy anything.
Calendar your due dates
This is underrated among all the other credit card practices. But this will help you save a lot of money if you stick to it. One of the ways credit cards can threaten your finances is if you don’t pay your dues on time. First of all, it will trigger late penalty fees and other charges. If you let it go unpaid long enough, it can also affect your credit score negatively.
This is why if you want to stay away from credit card problems, learn to calendar your due dates. That way, you’ll be reminded if there’s an upcoming payment. You can prepare for it and you won’t be late in sending your payment.
Take advantage of the rewards
The last of the credit card practices that you need to know is about rewards. There are times when it’s wiser to use credit cards over cash. But only if this is an expense that you have to make. Don’t buy something just so you can earn rewards. Buy it because you need it.
If you have a credit card, it usually has a rewards program. In case you don’t know anything about it, ask the credit card company. If you are using that card for necessary expenses, then it makes sense to use your cards so you can benefit from the reward. If it’s cash-back rewards, it means you just saved money on your usual purchases. In case the rewards are in the form of points, you can use that to get freebies or things that you might need in the future.
Besides, learning how to use the rewards of your credit card will make you more cautious about how you use it. You’ll always be conscious of what you’ll spend on and the rewards that you might be getting. That’s a good habit to have because you’re more likely to make better spending choices.
Credit card practices that can destroy your finances
If there are credit card practices that will keep you from more debt, there are also those that can destroy your finances.
Here are the few practices that you need to stop doing.
Using it as a primary emergency fund
A lot of people use their cards as their emergency fund. Reports reveal that a lot of American families use credit cards out of necessity – usually to pay for medical costs. We all know how expensive health care costs can be. It can quickly lead you to sink into debt.
Not only that. Sometimes, you can’t control what will happen. What if you’re caught in one emergency situation after another? Will you use your credit card to pay for all of those? With the high-interest rate, it might take you forever to pay everything off.
Letting others use your card
This is one of the huge credit card practices that you should never do. Never entrust your card to someone else. They can abuse the use of your card if you are not careful. In case it’s an emergency, it’s better to just give cash aid. But not the card.
You see, an unpaid credit card debt will not just be your responsibility. It can also destroy your credit reputation. It can lower your credit score. That’ll affect your ability to borrow money – like get a mortgage to buy your own house. Or buy a more fuel-efficient car to lower your auto maintenance costs.
If you don’t want to compromise your credit history, make sure you’re the only one using your card.
Maxing out your card
This is one of the credit card practices that a lot of people are guilty of. They don’t stop using their cards until it’s maxed out. You have to understand the real effects of maxing out your credit cards.
First of all, you have to pay for all of that. If you have a high limit, it’s nearly impossible for you to pay this all off in one go. That means some of the balance will be carried over to the next billing statement. This means a finance charge will be added to your balance. With the high-interest rate of your credit card, this charge will probably be high too. That means your debt can quickly accumulate.
Another reason to avoid maxing out your card is the penalty. You’ll have to pay fees if you max out your card so try to avoid that as much as you can.