Credit cards are an essential financial tool in the current fast paced world, but if not used responsibly credit cards can be your worst nightmare. There are certain people who can use credit cards and some people who should never go near it as it demands a certain level of discipline. If your credit card payments go out of control it will result in breaking your savings or you will be left with nothing to save. Let's see some tips on how to use credit cards.
1. Pay off your balance every month.
Paying off the credit card bills every month in full amount is inevitable while using a credit card responsibly. In order to pay bills on time it is important to keep in mind to resist the temptation to spend more than you can afford. Delaying the bill payments can result in paying huge amounts in interest and if left without paying for a long time it can result in huge credit card debt that can be a burden.
2. Use the card for needs, not wants.
It is important to see a credit card as a temporary loan to yourself and repay the loan as soon as possible. Using a credit card for all you want is a dangerous path that will lead to huge debt. Most of us will be tempted to use a credit card for purchasing a new mobile phone or some appliance that otherwise one can’t afford in the long run will put you in debt trap and wont have anything left for savings.
3. Never skip a payment.
Skipping a month’s payment is an absolute irresponsible move. It is always better to pay the whole bill but if you can only afford the minimum payment try to pay that. Leaving a month’s bill without any payment will result in huge interest and debt. Missing a credit card bill can also result in running up your credit score.
4. Credit card as a budgeting tool
Credit cards can be used as a budgeting tool if used responsibly. Credit cards help in tracking your spendings. If you use your credit card for all your spendings you can track where you spend more and can try to bring it down next month. This should only be done if you’re confident in paying off the bill on time.
5. Stay under 30% of your total credit limit.
To have a healthy usage of credit cards you can try to stay under 30% of the credit limit available. For example if your credit limit is 1 lakh you should try to limit your expense to 30,000. This helps in maintaining a good credit score and avoiding credit card debt.
Conclusion Having a credit card is convenient in today’s world but if not used responsibly it can lead to a number of problems. Having financial freedom is important for a peaceful life. In order to achieve financial freedom one should avoid debts at any cost. Keeping in mind to use credit cards responsibly is the only way to avoid all the financial struggles one will have due to credit cards.
