Basic Tips to Use Credit Cards Wisely

Imagine walking into a bank to ask for a loan for a night out with friends.

“Right away, sir/ma’am,” your friendly banker says. “Just sign here, here, and here. FYI, the annual interest rate is 20%, and there are steep surcharges for late payment.”

But who is crazy enough to borrow a loan for a night out with friends? The idea sounds far fetched, but the way we behave with our credit cards mirrors that same scenario.

Lesson one: credit card is not free money.

We need to handle it with some level of financial wisdom, or the chickens will come to roost. That will be the day when you want to start a business, or pay college fees—you go into a bank hoping to secure financing, only to get turned away with a stern “NO.” Reason being? You used up too much credit, and now your credit score is alarmingly low. No lender wants to touch you.

The best advice when using credit cards is this: craft a budget.

Yes, there will be those necessary expenses that you need to make with a credit card. Nonetheless, you need a system to monitor and regulate your spending habits. Without a budget, it’s easy to go over the limit and blow all of the money on unnecessary things. A budget keeps you in line.

And don’t forget to check credit card reports.

Like many other people, you are probably using a credit card for valid and financially wise reasons such as:

  • To build up a positive credit history and credit score
  • To take advantage of perks and rewards
  • To manage cash flow and pay for large items interest-free

But what happens if you can’t keep track of your spending? Your credit score will end up in a bad place. For that reason, a financially conscious individual will check their credit reports on occasion just to ensure they have a good standing with the lender’s bureaus. Going through these reports could also help to address errors such as wrongful transactions and penalties that you don’t deserve.

Remember, a credit card is borrowed money, and so you have to pay it back on time, or you will be in for extra charges. If you fail to pay your credit card bills in full every month, you may find that your debt starts to pile up. That is toxic to your financial health. Get into the culture of paying your balance in time, and your life with credit cards will be stress-free.

It’s obligatory to use a credit card when completing certain transactions. Even where they are not mandatory, they save you the hassle of cash and IDs. If you have questions, please contact your local community banker for more tips on how to use your credit cards well, and protect your financial freedom.

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