10 Smart Ways To Manage Your Credit Card Usage. Many young people in South Africa have credit cards. A credit card has many benefits like helping you build your credit, lets you enjoy perks and rewards, and offers convenience in paying for your bills and purchases. It’s important to know how to use them wisely though.
1. Keep Your Credit Utilization Low
Don’t max out your line of credit. Carrying high balances in relation to the total line of credit can negatively impact a person’s credit score. Ideally, the balance should be less than 50 percent of the total line of credit at any given time. High balances also lead to increased interest payments if the balance is carried over month to month and not paid off.
Pay Off High-Interest Credit Cards First
Accumulating credit card debt with high-interest rates is bad debt that should be paid off fast. The best way to do this is to create a plan and time frame to help you stay on track to debt repayment. Make sure to get rid of your high-interest debt first while still paying the minimum payments on other debt, as it has more of an impact on your savings and credit score.
Never Make Late Credit Card Payments
Always make sure that you pay your bills on time. Be mindful of your monthly due date and never pay your bills late. Making late payments will result in late payment penalties, interest charges, and a bad record on your credit report, which will affect your credit score.
Stay Away from Cash Advances
Credit cards should not be treated as a bank account that you can get cash from whenever you need it. Stay away from cash advances because they can be very costly when it comes to fees. Also, most card issuers start charging interest for cash advances as soon as you make the transaction, with no grace period.
Be Careful with Promotional Offers
Credit card companies use promotional offers to bring in new customers or to make their existing customers use their credit cards. While some of these promotional offers may be beneficial to the users, you should still be careful and ensure you understand the terms thoroughly. Also, don’t fall into the trap of making unnecessary purchases just because there’s a “special offer.”
Understand the Card’s Terms & Conditions Before Applying
Before you choose any credit card, make sure that you understand the card issuer’s terms and conditions. Read the fine print and ensure that the fees, interest rates, penalties, rewards, and protection against fraud are clear to you. If you don’t understand something, don’t hesitate to ask the issuer.
Stop Using Credit Cards Until They Are Paid Off
If you are new to credit, make sure you don’t add more to your credit cards than you can pay off that month. If you have already fallen into the debt trap, you should stop using your credit cards until they are paid off. Once you have paid off your credit cards, use them to purchase things you would normally purchase with cash or a debit card.
Use It for Convenience, Not a License to Spend
The best way to use a credit card wisely is to use it for convenience, not as a license to spend. Never carry a balance on an account. Charge only what you can pay off in full, and on time, every month. Making this a habit will save you on interest, fees, and stress over the course of a lifetime. Live within your means to minimize financial stress.
Don’t Share Credit Card Accounts with Your Spouse
There is usually minimal benefit to having multiple cardholders on one account. One partner can have spending problems, obtain limit increases, or incur debt, and the other partner will also be liable for this. This can often result in problems in the marriage. Spousal cards can limit the available options to deal with the debt, both while together and if the couple separates.
Report a Lost or Missing Credit Card Immediately
If your chip credit card is missing, lost, or stolen, you should report it immediately, else you can be liable for charges if the card (via the chip technology) was present at the transaction. Credit card companies are using the chip in credit cards to mitigate risk. If you don’t report the card missing or stolen and it is used, you can be on the hook for the charge. Most consumers don’t know this.