Credit cards are an integral part of many of our lives. Millions of us own at least one, some owning many more. And for many of us, we sadly rely on them, which can be very troublesome indeed. Keeping that in mind, we thought it helpful to write on the topic of how to use credit cards responsibly.
Stating the obvious you might say, with good reason. And yet for so many people they treat a credit card as if they are not really spending real money. They are swayed by the fact that the cost of the purchase is not subtracted from their balance sheet immediately. There is a reason I still use cash to make most physical purchases, making me almost a pariah. It is because it makes my purchase more real, i understand fully and immediately the financial implications and consequences of the purchase. If you buy something on a credit card, you will have to pay off that credit card at some point. In fact, you may end up paying off more than the cost of the purchase.
Whilst credit cards can be a contributing factor to many people having a significant debt problem, they are not inherently evil. They are a useful product that can be really advantageous so many if used in a responsible manner. And using a card regularly and making repayments on the balance can help contribute to a healthy credit score. So regular use of a credit card is fine as long as you are capable of paying off what you put on there.
If you are the type of person that regularly makes a purchase on a whim, or because you see something you like and simply feel that you need to have it, then perhaps you should keep your card at home. Make it hard to use it so that you do not end up piling on purchases for items you do not need. Leave it out of sight at home too, so that it takes a conscious effort to use it.
Do not use a credit card for items for which you would not normally have the funds for. There are a few exceptions to this rule that I will cover in the next point, when it may not cost you to take time to make repayments. But the general rule is that you should purchase items and then pay it off within the month to prevent incurring interest costs.
Most credit cards come with perks and welcome offers. So use these perks and offers to your advantage. Do not just use a credit card for convenience, but try and get something back. Choose the card that is best for your circumstances. If you must make a significant purchase for which you do not have the funds, then choose a 0% interest welcome offer. That way if you take time to repay the balance, you will not lose out financially. If you make regular purchases, choose a card with a reward system on it.
This is a must. Always check every credit card statement. If you have gone paperless, put aside a time to check transactions online. This is how i noticed a fraudulent purchase on a credit card last year for over £300. Also, you need to check for errors, for offers running out, and to ensure you are paying off the right amount.
If you have no use for a credit card, the natural instinct is to close the account. But strangely this may be bad for your credit score, as an active card that has not been maxed out with purchases is a good sign for prospective lenders. Don;t close cards unless you feel you have to.