3 Tips to Manage your Credit Card

Well, using credit card may sound like entering into a debt trap, but if you are smart with your money, you can actually use your credit card to your own advantage. In fact, your credit card can be an important tool to establish your credit worthiness over a period of time, which in turn may help you to get loan for your business or for your home or for that matter any time you need to borrow a large sum of money. However, it is important to manage your credit card wisely; otherwise you may find yourself in a debt trap. Here are 3 tips that can help you get the most out of your credit card.

Borrow Wisely

When it comes to choosing a credit card, it is always good to shop around for the best credit card that offers lower APR (Annual Percentage Rate). Remember, interest rate and APR is not the same. In fact, they are two different terms. The application might mention the interest rate of 3%, which looks attractive but you need to read the fine print to get the APR which includes the interest rate and the annual fee. While banks may charge you anything from 12% to 20% in APR, credit unions are consumer-friendly and offer credit cards with an APR from 9.9% to 18%. Credit-unions are non-profit and are committed to help their members. However, if your credit score is not so good, you may be turned down by the credit union. So, you may need to shop around different banks and weigh in your options and choose the card with lowest APR. If you already have a credit card with a higher APR, it is never too late to negotiate with your bank for a lower APR.

Plan your Budget

Ok, you have got a credit card and you can easily swipe the card for your grocery shopping or for buying new clothes. Why do you need to budget? Well, for starters credit card debt is a debt after all and it is not free money. So, it is important that you shop responsibly. In order to do so, you need to have a plan in the form of a budget. Secondly, it is advisable not to use credit card for small purchases such as grocery, utility bills or any other recurring purchases. Use the credit card for making big ticket purchases like a MacBook or purchasing airline tickets (if you have to travel), which you cannot pay upfront . In fact, this way you can make that big purchase without hurting monthly budget and you can make a small monthly payment as well.

Pay your Balance on time

If you are a good customer who pays the credit card balance on time and in full, you get rewarded with a good credit score. This good credit score may come in handy when you are buying your first home or may be a second one. So, for big life events or for big loans, you need to maintain your credit worthiness and therefore, you need to pay your credit card balance on time. Getting a lower interest rate for your first home is like freeing up extra cash and adding another stream of income. So, a little bit of discipline now, gets you free cash in future.


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