Credit cards are a financial tool which, when used wisely, can provide financial security and support when needed. However, the loaned money also has its negative consequences associated if incorrectly used.
When being granted a credit card by a financial institution, this means they have decided to offer a regular and accessible loan option. However, these credit cards do come with associated agreements and potential penalties if not adhered to. This means that improper use can result in detrimental consequences that have financial implications.
Dealing with credit involves more than just acquiring things – it is also a life lesson on austerity and planning. Here are some useful tips for all stages of credit card usage, from choosing the right financial institution and the type of credit card to payments.
Know your Position
When applying for a credit card, there will be a check on your credit score to test whether you’re suitable to be loaned money. There are many ways to check your credit score and some online tools provide provisions on when you’re most likely to be accepted for a credit card based on your credit score.
Act Wisely when Choosing a Credit Card
Choosing a credit card can be difficult as there are many options on the market. When you’re thinking about what you are going to use the credit card can help make this decision easier. You could be aiming to build a good credit score, make use of rewards on offer or looking for low-interest rates.
Whatever the reason, it requires attention to certain details before you make a decision. There are a few credit card types that banks usually have available for first-timers.
- Regular Credit Cards – Standard credit cards come with no additional features, like rewards, points or benefits. These commonly come with a variable interest rate on all purchases.
- Introductory credit cards – These credit cards come with introductory offers which might be more suited to your current financial situations. This could be a specific period of 0% interest on payments or associated insurances
- Students Credit Card – A credit card designed for young adults that are still in education. The benefits associated with these cards are more targeted towards students and regularly financial caps to prevent the easy ability to get into financial trouble.
- They can be considered a method to be loaned financial support but with additional regulations by the financial institution to educate young adults on the risks of financial loaning.
- Low-Interest Credit Cards – These credit cards come with low-interest rates on purchases, they might be fixed for a specific period and then amended to a variable amount which generally is much higher and easier to get into spiralling debt.
Manage the Credit
Having too much credit is just as harmful as having no credit score, so if you already have built a high credit score, try not to affect this by owing large sums of credit. It’s strongly recommended to pay your balance in full every month to maintain or improve the credit score.
Do not Overlook Interest Rates
Interest rates are when banks make a profit on their investment. Interest makes reference to the fee charged by the bank for every banking transaction such as purchase cash advance withdrawals.
In addition, not meeting the minimum monthly payment also generates interest, so be aware of any associated costs that might be added if the credit card is mismanaged.
Avoid Building up on Debt
When purchasing on a credit card, it means a bank is loaning you the money and creating a debt for the amount. If these debts are not paid or allowed to incurred high interest, then clearing the debt might become more difficult to clear than expected.
The reasoning is that interest will be added to the balance each month, meaning paying interest on an increasing balance from the previous month’s interest. Avoid building up credit and you’ll have more control over your finances, thus getting peace of mind and clarity to make wise future financial decisions.
Learn to Identify the Status of your Credit History
This may not be the first time you own a credit card or credit, so it is advisable to not forget about past credit, there may be money waiting to be claimed, such as previously mis-sold PPI.
You can also check your credit score to see how you’re doing but based on the footprint left by the check, they can have implications on the resulting score if performed too often.
Exporting the options available through a credit card can be difficult and managing usage can be difficult, but whilst you remember to meet minimum payments and being aware of the full financial situation. A credit card can be a great tool to be used to manage money and enjoy the benefits.