How Can You Use Your Credit Card Effectively

Credit cards are issued by financial institutions, such as banks so that a credit card holder can make purchases when he runs out of cash. Interest charges on these credit cards usually begin after a month of buying goods. The borrowing limit of this card is based on a credit worthiness of a credit card holder. However, it is important to use it effectively in order to avoid a bad credit rating and to improve your credit scoring.

There are certain people who make daily purchases with these cards and do not even bother to return their credit until they get their bills. This is where they start worrying a great deal because they realize the interest charge is so high that it is really difficult to pay the entire sum at once. Therefore, it is very important for them to cut the bad ways of spending but if they can’t; it is better to cut the card. Your Personal Financial Mentor always tells you how important it is to be organized when you use a credit card in order to improve your credit rating score.

Be wise when you choose a credit card – Always do a detailed research before deciding to get a credit card. You should analyze certain factors, such as credit card fees, interest rates and other incentive features before finally taking a card. Because if you don’t; you may end up having a bad credit score. It is very common to keep a backup card for emergencies when a person only needs one card. Having multiple cards is very dangerous and risky because you have a higher chance of defaulting if you are unable to make payments on time.

Never cross your credit limit – Can you bear extra fees and other charges if you use your credit card in excess of your credit limits? Of course you cannot because no one likes to pay over and above their credit limit. Therefore, it is important to pay off your balance right away. Credit cards are a type of revolving loan and paying down a revolving loan can dramatically earn you a high score. A lender is always keen to see how efficient you are in managing your credit sensibly. If you cannot afford to pay off the entire balance, it is wise to pay the least you can and it is even better to pay down the credit card that is close to its limits.

Be sceptical – it is important to check your bills every month. If you find a transaction that you never made, there is a chance that you may be a victim of identity theft. Inform your lender as soon as it comes to your attention or else you will exceed your credit card limit without knowing it and will also have to bear the burden of heavy interest and other charges. A lender can remove the fraudulent transactions from your credit file and can lock the card instantly.

Avoid a reward scheme – Reward points attempt to draw a person into using certain types of credit cards but eventually, he realizes that these points carry a small value. He has to pay an annual subscription to maintain a reward scheme. This fee can be equal to the interest of one month. Therefore, these schemes tend to make you pay more instead of reducing your debt and this cost can outweigh the value you are likely to gain from reward points.

Categories: Credit Cards

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July 15, 2013 How Can You Use Your Credit Card Effectively