The most financially literate people know that there are two paradigms when it comes to finances: You either make your money work for you or you work for your money. A credit card is a priceless tool if you can start using it wisely.
The tragic reality for almost every consumer today is that they have to constantly work for a large percentage of their finances, while some have loads of debts on credit cards. However, this doesn’t represent a death sentence. You can start learning and adopt a diligent and disciplined approach towards making this a blessing to your life.
Using credit cards to your advantage
The convenience they avail to your life is undisputed and most people are so much used to that lifestyle. Ditching this option is a good idea if you are prone to misuse it given the long-term benefits of a debt free life. But you don’t need to throw them away if you can cultivate some discipline that creates a healthy financial life.
Here are some tips to help you have a healthy relationship with credit:
Pay your balance
If you want to break free of debt and stay out for good, you need to stop living beyond your means. Always charge amount you are sure you can comfortably pay by the end of the month. If you want to stay ahead, try paying several times in a month.
Remember that this is among the most expensive forms of financing so it’s always good to make sure that you don’t carry a balance. If it’s already there, the best option is to pay and avoid accumulation.
By committing to this, you are reducing the interest rates and if they are too high, then maybe finding an option with lower rates could benefit you in the long-term.
Use it on making big purchases
A common story that you hear with people in debt is that they never realized until it was too late. Normally, payments made for small amounts maybe $10-$20 have a tendency of sneaking up on you. You see them as small amounts that are “nothing” but the truth is that you should really watch these. These are the proverbial little foxes that will grow up and eat you up one day.
The best way to take advantage of big purchases is to create a plan and save up enough cash for that item. Then you can go ahead and make the payment with your credit card, this way you unlock your rewards and the good thing is that cash is ready to foot that bill.
Set the limits
If for any reason you know that you might fall into the trap of overspending, contact your provider and ask them to lower the limits. Put a ceiling on an amount you know for sure that you can comfortably pay back in a month. These changes can be instantaneous after effective communication.
If you truly are disciplined enough, set a limit that is self-imposed and commit to not spending an extra dime until it’s fully settled. Of course, it will be a big plus if you can limit its spending on essential items.
Get an option with the best rewards
There are so many rewards that are offered by credit card companies, if yours doesn’t have any appealing rewards then it’s time to get a better one. Of course, no one needs to pay an annual rewards fee when there are several options with nil charge on rewards. What needs to be done is figuring out the rewards that best suits your lifestyle and take advantage.
For instance, if your lifestyle has you spending a lot of time in your car, then you should go for an option with the maximum points on gas stations. That way you have optimized your rewards potential.
Use the points to pay your balance
Now that you maximize your rewards potential, you will accumulate quite an amount of points. It’s easy to get lured into making more purchases with your points but the more they can be held back the better.
To successfully make this work for you, don’t use the points to buy an item.
Instead, use them towards settling your balance and this will actually go a long way in reducing the interest.
Have extended warranties
There is some sense of security that comes with warranties and that’s why most people purchase warranties for their items. You can get this for free for an extra year.
Not all options offer this service but among these have that provision:
- American Express
- Visa
Again not all issuers are eligible for this service but it’s always nice to check if you are above the cut.
Keep track of your expenditure
The good thing about this payment method is that there will always be a trail to follow. One of the best habits that you can form is logging into your account regularly and checking the usage. This will allow you to realize when things are going south, especially if making small amount payments is still into you.
Similarly, you could use it to control your monthly budget for better results. Start by creating a written budget and then make your purchases through the card to eliminate the need for extra record keeping.
However, discipline is required to make sure there are no limits crossed.
Become above average
Statistics are full of appalling references to this option of financing. To step out of that statistical category at least form healthy financial habits discussed here. Always remember that this type of debt is expensive and you don’t want to be so deep in it.
Take constructive action and become a disciplined above-average credit card holder.
