How to use your credit card wisely?

Credit Cards | admin | March 10, 2011 at 9:23 am

Traditionally, spending within your means is considered the best way to manage your finances and remain financially healthy. By understanding some of the fundamental principles about credit and banking, you will be able to make better and more informed financial decisions. You will also be in a better position to plan your financial future while still enjoying the occasional indulgence. Read on for some smart tips on how you can enjoy financial flexibility and avoid debt.

There are many tools available to assist in the management of money and planning the future. Banks provide a variety of offerings, such as savings or checking accounts, which allow you to earn interest and are a much safer alternative to storing large quantities of cash at home.

Payment cards are another bank product that provide consumers a secure and convenient alternative to cash and cheques when making purchases. Fundamentally, payment cards or credit cards work on the 'buy now pay later' principle. Other options available include debit cards or stored-value or prepaid cards.

Credit cards provide you with a line of credit, which is the maximum amount you can charge to the card. As you make purchases, the credit line decreases. When you receive your monthly statement you have the flexibility of paying off the entire amount, or if needed, paying off the minimum amount due. When monthly payments are made to the issuing bank, the amount of credit line available is then restored.

Using a credit card also provides you with added security and ease when shopping or travelling, as you don't have to worry about your cash being stolen.

However, it is extremely important to keep in mind that managing your credit facility responsibly is crucial to building a better financial future. Here are some tips that will help you on this count: Remember that a credit card is not the same thing as free money. Charge only what you can afford to pay back and pay back the charges on time to avoid interest charges on the remaining balance.

Moreover, when changing your address, it is important that you notify the credit card issuer to make sure your account statements are delivered promptly. This will help you avoid additional fees for late payments.

You must always check your monthly statement, which itemises your spending pattern, and call the bank if there are any disputed entries. This also allows you to check your spending patterns and eliminate unnecessary spending. Lastly, if you have questions, call your issuer. The number can be found on your card and your billing statements.

Source: Economic Times