The credit card is a financial tool that can be of great help if you know how to use it responsibly and intelligently, however, some people trust and misuse them, ending up severely indebted.
First of all, it is important that if you have a credit card, keep in mind that that money is not your own money, it is a borrowed money that you will have to pay it. Being aware of this, will allow you to have better control and not fall into indebtedness, That may affect your credit history.
Evaluate what you will pay with the credit card
Before using the credit card, analyze if what you are going to pay should be deferred to months. Why? Well, probably a piece of furniture or high-cost equipment, you cannot pay it in one payment and if you think about it, it is convenient to pay it in months because it is a product that will have a long shelf life.
Otherwise, buy clothes, food in the supermarket or some low-cost or short-lived product. Whatever the case, analyze whether the product you are buying deserves the cost of the interest you will have to pay.
Try to take advantage of promotions, such as months without interest
Related to the previous point, if you are thinking of paying for some furniture or equipment with your credit card, analyze different options before making your purchase. If you find an option that has a “months without interest” promotion, take advantage of this alternative.
It is important that at this point you are aware that the deferred purchase in months does not generate interest as long as you pay before the payment deadline. If you do not pay before that period, default interest will be generated and your debt will increase.
Try to pay more than the minimum
Once your statement arrives, you can see the breakdown of what you have to pay. Although a minimum amount is indicated, we recommend that you always try to contribute more than this minimum amount, in order to really reduce the debt or not pay only the interest.
Know your cutoff dates and your payment deadlines
When the bank gave you your credit card, it indicated 2 important dates: your cut-off date and your payment date. Knowing them will allow you to have better control and planning of your payments.
Cut-off date: refers to the date on which your “account” is closed with all purchases you made in the last 30 days. Said with an example, if your cut-off date is on the 20th of each month, everything you pay with your credit card between the 21st and the 20th, will remain within your account. If you buy something after that date, it will enter until your next account.
Payment date: it is the deadline that the bank gives you to cover the amount indicated on your statement, regarding the payments you made with your credit card in the period that ended. If you pay after that date, the bank will charge you default interest for each day that passes without paying off your debt.
Do not use so many credit cards
Having several credit cards can become a problem, since you can lose control of what you are spending on each one. Also, keep in mind that for each card you will pay an annual fee. It is best to analyze the different options you have and keep the card that gives you better benefits: a lower interest rate, lower annuity fees, better rewards program, etc.
Use your credit limit wisely
On a credit card, the bank grants you a credit limit, which is the maximum amount you can dispose of. If you use that limit at 100%, you will not be able to use your card until you pay what you already owe, and you should take care of the interest issue. Here it is important to analyze if for certain purchases you should look for other financing options, such as personal loans, with lower rates than you would pay with a credit card.
Practicing these tips will allow you to have an intelligent management of your credit card and have better control over your personal finances.