Well, a credit card is a double-edged sword, if you use it wisely, you can manage your finances wisely, and if you start using it recklessly, it will only bring troubles to your life. It thus becomes crucial to use one of the powerful financial tools with careful planning.
Here are some signs that will help you if you don’t want yourself to land in a big financial hurdle.
Are you missing regular payments?
Our credit cards have a minimum balance every month that we can use it for our transactions. You must ensure that you make regular payments before the due date as missing the due date will not attract penalty charges but also affect your credit score severely.
How much are you paying for your credit card?
Every credit cardholder needs to pay the total balance used in the credit card. While not paying the minimum balance means you have to pay the penalty fees, however, never have this doubt that paying the minimum balance due will solve all your balance. If you regularly avoid paying the full balance every month, then you can also land yourself in trouble. The reason is simple! As the credit cards have a high-interest rate, you would lose money in the form of interest if you don’t make regular payments.
Are you worried that the interest rate on your credit card has increased?
The credit card companies determine the rate of interest for every cardholder based on the credit score and the repayment record of the cardholder. If you are noticing that the interest rate on the credit cards has increased, this is because you are regularly missing Credit Card payments and which has affected your credit score.
Are you utilising your credit card properly?
Well, not using the credit card is also a foolish decision. If you are worried about the interest rates and having a poor credit score, you must even know that using credit cards wisely can help you to build a credit score. Also, there are various credit card offers and rewards which you may miss if you are not using your credit cards at all.
Are you taking regular cash advances against your credit card?
Cash advances have the biggest disadvantage that there is no grace period with them. You have to pay interest on them as soon as you get the cash advance. Thus, it would help if you only took cash advance in case of emergency.
Dealing with the debt burden:
Firstly, always try that you don’t get trapped with debt burden and unlikely, if you have landed in one, one of the ways is to switch to another credit card with a lower rate of interest. However, remember it is only a temporary solution to deal with the debt burden.
How much credit limit can you use?
The credit utilisation ratio is the amount of funds that are used against the total limit of your credit card. You must at least maintain a credit utilisation ratio between 25%-40% to have a positive impact on your credit score. Utilising the overall limit of the credit card indicates that you don’t manage the finances well.
Conclusion: Having a credit card is never a problem, even if you have multiple cards but the key to using the credit cards is using them wisely. Don’t use the credit cards just because you have one! Remember you have to pay interest on the balance as well. Never ignore the above signs mentioned if you want to use the card in the best way possible.
Also, Read This: How To Get Your CIBIL Score and Credit Report For Free