How to Initiate Good Credit Card Practice
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Question: I recently applied for a credit card with my colleagues. I’m newly grad working on my first job. I noticed that they were so thrilled to use their cards and would do so at every chance. They make fun of me because I am so cautious to use mine, and still shell out cash when possible. What is the proper way to use a credit card? Any tips on how I can handle my credit card well?– Donna C.
Answer: Well done and welcome to the corporate world! You are now earning your own keep and have a bright future ahead of you.
We are sure that you want to be financially sheltered in the future. Having a credit card can help you accomplish that. This is because by having your own credit card, you are building your own credit history. If you have established yourself credit-worthy over the next few years, you will have access to credit which you may use for business or personal needs (e.g, a car or a house, for instance), to aid you and your family.
By having a credit card, you don’t have to bring heaps of cash to buy big-ticket items such as appliances. Deferred payment plans are available allowing you to pay in easy installments over a particular period of time.
However, the first thing you need to be familiar with credit cards is that every purchase you make becomes a loan from the credit card company. As such, it requires responsible use. After all, all debts need to be paid.
You can pay your statement in full on or before the due date, or pay a percentage of it—either the smallest amount (about five percent of your total bill) indicated or any other amount beyond it. When you don’t pay your bill in full, you will be charged interest which may differ in rate from one credit card to another.
You will also be charged an overdue payment fee should you fail to remit your payment on or before the due date.
Many people fall into problems by not using credit cards properly. When making purchases beyond what they can afford to pay, they put themselves in deep danger as their cash flow for their basic needs is affected. They also put themselves up for legal mess when they don’t pay what is due. And debts have robbed many people of a good night’s sleep. You don’t want that really.
Here are some tips on how to manage credit card properly:
1. Be aware of your credit card’s billing cycle. Know in advance the cut-off date when purchases will be posted and integrated in the next bill. For instance, if your credit card’s cut-off date is every end of the month, purchases made until August 31 will be included in the bill due in September. This will help you see if your budget can still have room for a purchase.
2. Set a monthly limit and be disciplined enough to follow it. Your credit limit is not additional spending money. Do not overspend to avoid embarrassment at check-out counters when your credit card is declined.
3. Pay bills punctually to evade delayed payment fees. To make things more comfortable, consider signing up for bills to be sent to you by e-mail. Then pay your credit card bill in the Internet from your bank account to save time.
4. Pay off the amount due as much as you can to avoid the total amount due from skyrocketing due to interest.
5. When your bill arrives, evaluate your charge slips with the entries entered in the bill. Instantly call the company call center if there is a inconsistency.
6. Keep your credit card in a secured place. Treat your credit card like cash – you won’t leave cash lying around, would you? Report stolen or misplaced credit cards immediately to block off potential unauthorized purchases. Also, keep credit card bills, charge slips, and proof of payment on file in a folder for easy reference.
7. Never agree to other people, even relatives, from using your credit card and posing as you.
8. When purchasing in the Internet, make sure that the website you are visiting is protected. Hackers may see your credit card details and use them if the website is not secure. A good tip for this is if you see https in the website’s URL. Take note of that extra “s”.
9. In case you are moving houses or offices, call your card company so you can still get your bills punctually.
10. You can make a cash advance using your credit card. However, doing so can be costly as you will be charged a one-time transaction fee aside from the interest, which is usually higher than for purchases. Use a cash advance for urgent situation only, and not to pay off your credit card bill or finance your day-to-day expenses.
11. Get only enough credit cards that you need. Some people need only one, while for others, having two is ideal to split personal from business expenses.
12. Play your cards properly. Credit cards reward points for every use which you can exchange for rebates, gadgets, annual fee waves etc. When shopping or dining, check if paying with your credit card entitles you to a discount or freebies.
Owning a credit card is a convenience for most people. Use it responsibly to maximize its benefit.
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