When used wisely, credit cards can increase your buying power and help you cash in on various rewards and perks. However, most people seldom take advantage of these perks because they end up carrying a balance from month to month. To know how to use a credit card the right way, it’s important to understand how they work.
Is A Credit Card The Right Choice For You?
Credit cards allow you to spend money up to a preset limit. If you pay off your credit card bill in full every month, you won’t have to pay interest. However, if you only pay the minimum required amount and carry a balance, you will be charged a high APR. This is one reason why you should avoid charging expenses to your card if you know you cannot pay off the balance in full. If you are able to use your credit card responsibly, it’s a good idea to apply for one.
Benefits Of Using A Credit Card
Credit Cards Are Safer Than Cash: If your card is stolen, you can call the bank and cancel it immediately. Fraudulent charges can also be disputed.
You Get Perks: Credit cards come with numerous perks like complimentary lounge visits at airports, cashback, reward points, etc.
You Can Buy Now And Pay Later: Even if you don’t have enough money in hand right now, you can charge the expenses to your credit card and pay the bill later, in case of financial emergencies.
Things To Keep In Mind
The Interest Rates Are High: The interest rate on credit cards can go as high as 23% when you carry a balance on the card.
Watch Out For Additional Charges: Apart from the interest rate, credit card providers can charge you additional fees for cash withdrawals, late payments, etc.
Late Payments Could Affect Your Credit Rating: Not paying your credit card bill on time could affect your credit score and make it difficult for you to access loans in the future.
With credit cards, remember that it is easy to fall into a debt trap. So, ensure that you keep an eye on your monthly statements and pay your bills on time.