Credit card use is already a big part of life for most people. Charging expenses on their card is so convenient that many use it to pay for several expenses. As time goes by, credit cards have been getting a bad reputation and being blamed for a lot of consumer debt problems. Credit cards are being targeted as a big reason why a lot of people are paying big debt amounts.
Fortune shared in an article that the average US household has about $8,200 just for credit card debt. That is a big number but you need to remember that your credit card is just a tool. How you use it will reflect on your difficulty to repay back your debt. If you use your credit card well, it can actually benefit your budget. Here are some of the ways credit cards can help you and your finances.
It helps you with your budget
One of the benefits of credit card use is that you get to manage your budget better. There are people who prefer to use their credit cards and incorporate them into their budget. The main reason for this is that they get to segregate specific expenses they make every month. This way, it is easier to monitor that specific item.
Take for example the food budget where people would readily swipe for their groceries every week. If they eat out, they use their credit cards to pay for it. Anything related to their food budget, they would use their credit cards. This way when the statement comes in at the end of the month, they can clearly see how they used up their food budget.
Using credit cards to pay your way for specific items in your budget should not be taken lightly. There are many problems you will meet along the way which can make this a challenging decision. You just have to make sure that you pay close attention to how you use your card. Make sure that you use it only for the specific expense item you assigned it to.
Payment is easy
One thing you have going for you when you look at your credit card use is the fact that payment can be a breeze. This is partly because technology has grown by leaps and bounds that even the financial industry has seen its share of development. In particular, there are lenders and banks that make it easy for you to pay your bills.
It works for both you and your lender when credit card bill payment is a breeze. For your lenders, it increases the chance that they will get paid on time by their clients. For you as a consumer, it helps you save time in paying your bills. You can even get the payment straight out from your bank account. This makes payment a breeze.
As payments can be made online, it means that you can also view your statement online. This helps you monitor credit card use better. You can check what expenses you have charged on a specific credit card just to make sure that you are using it according to plan. The sooner you can catch mistakes in your credit card use, the more you can use it more efficiently.
Credit card rewards
One of the best things about using credit cards are the different rewards offered by lenders for their cards. There are some cards where you can accumulate points you can use in different ways. There are some credit cards which gives you the chance to use rewards for hotel stays, flights, and even for cashback opportunities.
What to avoid when using credit cards
Now that you have a pretty good idea of how you can benefit from your credit card use, it will also benefit you to know what you need to avoid. Here are some of them worth looking into.
Confusing one card with another
There is a good chance that you are using more than one credit card. With that comes multiple billing statements every month. You could be using one credit card for your food expenses, another for car-related expenses, and maybe another for an emergency situation. Once you get all the statements, you need to be very careful in handling your payments.
When you are using more than one credit card, there is a chance that you might mistake one payment for another card. Once this happens, there are two things that can happen. One is that you will overpay for one of your credit card bill. Once your lender receives that payment, it will be hard to get a refund for it.
The other thing that can happen is that you will pay a smaller amount on another card. This is where your problem can start. For one, your lender will now have the right to put fees and other penalties on your succeeding month’s payment. You need to make sure that you are able to monitor your payments. One thing you can do is to consolidate your debts so you end up managing just one account.
Taking out a cash advance on your card
When you start talking about credit card use, a cash advance will always be in the discussion. This is a feature of your credit card where you lenders give you the chance to advance some cash. Though it is offered, you need to make sure that you think twice before you head out to the nearest ATM taking out a cash advance.
You need to take note that the fees you pay for that cash advance are a lot different and separate from normal credit card charges. For one, most lenders would normally charge either a flat fee or a percentage of what you take out whichever is higher. You also have to deal with interest on the cash advance which starts accruing immediately which ranges from 20% and up.
One benefit of taking out a cash advance is that you get your hands on cash rather quickly. If you find yourself in an emergency, taking out a cash advance can be a lifesaver. Just know that you are in for some hefty fees once you start paying it back. The more if you miss your payments because the penalty on succeeding payments can be enormous.
Missing payments on your credit card
When it comes to credit card use, the number rule is to never miss a payment. You have to understand that you are using money which is not yours. As such, you need to pay penalty when you do not pay your bill on time. Every time you use your credit card, you are taking out a short-term loan from your lender extended to you through your card.
Missing your payment due dates will not only increase your succeeding bill, but it will also have a negative effect on your credit score. Remember that your payment history is a big factor in computing for your score. When you are late with your payments, it will pull your score down and make it hard for you to enjoy lender preference when applying for loans in the future.
You can benefit from credit card use when you use it wisely rather than swiping away on items you do not have any need for. You need to think twice before using your card and always make sure that you can pay for the whole amount at the end of the month.