The intelligent use of Credit Cards

In today’s scenario, a credit card is mandatory for everyone – whether you are a businessperson or a salaried professional. Having a credit card means security, that you are not going to run out of money and you can take care of any urgent expenses.

The only problem is that most people don’t know how to effectively use their credit cards. While some never use the card, the others somehow tend to spend more and increase their liabilities over time. This is definitely not good for your financial well-being.

So, how are you supposed to use a credit card in an intelligent way?

The first and most important thing to keep in mind is that you should always try and pay the balance every month to avoid getting charged any interest. Not paying your full dues on time will only mean that you have to pay a hefty amount as interest, at 3 to 4% per month, or 36 to 48% per year! “See the fine print on your credit card bills”, which only means that you will be stuck in a situation where you are continuously paying back your debt. Many people think that the “minimum amount due” is what they need to pay per month, but don’t realize that the unpaid balance is accruing interest and other charges at the highest rates as mentioned above.

However, if you clear your full dues on time, you get reward points and also make your everyday expenses without having to accrue any interest. This will again help in avoiding any extra interest and also improve your credit score.

There can be a case when your expenditure is higher than what you can actually pay back. This might mean that you have to pay interest and also bear the burden of debt. Therefore, it is advised that you always keep a track of your spending. This way, you can keep your expenses in the preferred limit.

Worst part about having a credit card can be the temptation of spending more. Remember, your plan is probably to save more and invest your money in appropriate places. Thus, make a wise decision and set a realistic credit limit on your card. If you think the current credit limit is too high, then pick up your phone and reduce it right away.

It is true that you can use your credit card in the time of emergency. However, that might not be the best idea when you can’t actually pay back. For this, you need to have a reserve investment that can be used in times of need.

So, while it is smart to use your credit card effectively, it is even smarter to have an overall investment plan. How do you do that? Contact EPFP Catalyst and join one of our specially-designed courses where we teach you everything about financial planning so that you always get the best rewards sans any extra interest.