When used unwisely, credit cards can bond people into debt and make it very difficult to recover financially, however, when used wisely, they’re a great financial tool that enables you to manage your cash flow. Provided that you pay off the balance every month, or most of it if you’ve made a larger-than-usual purchase, you’ll be able to keep on top of your debt and repayments while ensuring you’ve got access to cash all the time. Use the following tips to get the most from your credit card and avoid preventable problems that could see you wallowing in debt.
Understand Your Credit Card
Assuming that you’ve already got a credit card, it’s essential that you understand its details. Each card has key details or features, so you need to understand the following in relation to your card:
- Interest rate – This is how much you’re charged each month in interest on your purchases.
- Annual fees – An annual fee is levied on each credit card. Some cards incur higher fees.
- Payment terms – Are there features like interest-free periods on purchases or transfers?
It’s essential that you understand your credit card so that you can manage your purchases and repayments accordingly. The better you understand your card, the more you’ll get out of it. What’s more, if you find that your card isn’t the best one for you, look at upgrading to the credit card that’s best for cash flow management and your personal situation. Some credit cards are better suited to some people than others depending on factors such as usage, spending habits and personal income. It won’t cost you anything to upgrade and switching to a better card could save you money.
Develop Good Credit Card Habits
To manage your cash flow effectively, not incur more interest charges than is necessary and avoid incurring greater debt than you can repay over the course of a month, it’s essential that you develop good credit card habits. To maximise the benefits of having a credit card, take note of the following:
- Create a budget that enables you to repay what you spend on your credit card monthly
- If you make a large purchase, ensure you repay more than your usual monthly amount
- Leave your credit card at home if you’re tempted to spend more than you can repay
It’s important to develop good credit card usage habits and not use your credit card more than is necessary. While it’s fine to make day-to-day purchases on your card, you need to manage the debt that you incur responsibly. Don’t let it get out of hand or it can be difficult to get on top of.
Whether you’re yet to apply for a credit card or you’ve already got one, it’s important that you understand the details and features of your card and develop good credit card usage habits. Credit cards are excellent financial tools for managing cash flow, and not only for individuals but businesses as well. However, they need to be used wisely if you’re to avoid incurring a level of debt that you find difficult to repay.