Your credit card can become a good business or a bad business. It is a matter of the handling you give it. Are you sure you do well? How to use a credit card well?
I still remember the day my first credit card was delivered. I felt adult and millionaire. I bought clothes, jewelry and bags, invited friends to dinner, filled the tank with gasoline, gave gifts. When he opened the wallet, the card was the first thing he saw. It was great. It was as if my money was never going to run out. Sometimes, he indicated that the term should be six months, others three, others 12, others 48, others one. I said it without thinking, just for the pleasure of giving the order. The feeling lasted several days. In fact, until the first account arrived. That day I hated the card.
Then, of course, I understood that I had created the problem. I had accepted the conditions. I had spent too much. I had not understood how to use a credit card well. It was time to assume the consequences and pay the money. Basic calculation error.
Benefits of a credit card
Credit cards are one of the most interesting products of financial institutions in the world. The cards move millions of millions. Department stores move sales and are very profitable.
Of course, the cards have very attractive benefits: points to redeem on purchases, miles to travel, special discounts or returns. They allow you to buy high-value merchandise in installments, like when you don’t have cash and take advantage of special offers . Who doesn’t want that?
In addition, the cards are very useful, especially for unforeseen moments. Medical expenses, repairs and even gifts that we had not taken into account. Also, they are safe, rather, relatively safe. On a trip, for example, it is more comfortable to have a thin plastic than many bills. In addition, credit cards include some insurance that can be useful in emergencies.
And they are great for shopping online.
Yes, credit cards provide very good experiences. How can it be, then, that we turn them into nightmares?
The subject really interested me. I watched, asked and learned. Now, I apply these three rules to use a credit card well.
How to use a credit card well?
Rule # 1: The term
The credit card, as the name implies, is a credit. Some give you up to 48 months to pay what you buy. And as with every loan, there are interests. The card pays for you, accepts that you defer payment of the debt, and in return you apply the financial formula in which they take into account the value of capital, the interest rate and the term.
That is, in the longer term, you pay more and more and more interest. You will see it in each installment.
On the other hand, if you apply this rule, you will see a big difference: when you pay, the cashier asks you “how many fees” and you will answer “one, please” . Because deferring the value of purchases by one month (some cards give two months of grace) is equivalent to:
- Get the benefit of points, miles or returns;
- Do not pay interest on your purchases;
- Have a secure payment method.
The best rule you can apply is: choose to pay as soon as possible, one month, to pay zero interest.
If you want to change your habit of paying 12, 18 installments to pay a fee (and you owe a lot on the card), do it in stages. Thus, the debt will not torment you.
Rule # 2: The interest rates of some banks
The high interest rates of credit cards in Colombia are high rates. Depending on what you buy (for example, a mattress), you can apply a rate of up to 28.7% annual cash. If your card is from a department store and you use it in other establishments, the interest applied may be the highest. If you use the credit card to withdraw cash, you are buying money at very high prices.
The golden rule is: use the cards only to purchase products or services and always prefer a short, very short term. Thus, you will lower your accounts.
Check the rates that your credit card applies and avoid the higher charges. And, please, always pay on time. Late fees are even more burdensome.
Rule # 3: The quota and consumption
When they approve a credit card, they approve you a debt quota. The idea, of course, is that you use it. But with financial wisdom.
Plan your purchases. The cards are great for buying appliances, furniture, travel, tuition to study. Use the quota and release it as soon as possible . Thus, you will earn many points or miles and pay few interest.
Rule # 4: The purchase date
The cards have a cutoff date. That is the day they verify what you bought during the period and proceed to invoice r. If you shop the next day, you will have earned a few more days to pay.
For example, the cut-off date is the 26th of each month, the bill comes to you the first days of each month and you must pay on 15. Purchases on the 27th or the 28th (before the end of the month, to receive and spend your salary), will be billed until the end of the following month. It is as if you pay 45 days.
Rule # 5: Security
Fraud abounds. You already know that there are many sites on the internet that are not safe and you must learn to recognize them. If you shop on those sites, you may have problems later. Someone can copy your card and continue shopping in the rest of the world.
Don’t lose sight of your card either. Making a transaction takes seconds.
In the case of detecting something suspicious, report immediately and suspend the card.
The management of your card is essential for your financial well-being. It is estimated that, in debts, including mortgage debt, you should not spend more than 40% of your income. Making a budget, helps to have control.