Banking and Finance

Tips On How To Manage Your Credit Cards Effectively

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Credit cards are important financial components in our lives. They offer us unprecedented levels of spending freedom by enabling us to use money that we don’t have. This freedom normally has a cost attached to it.

A credit card is just another form of debt. The only difference is that it comes in form of a card. This notwithstanding, normal debts costs apply. These include interest fees, application fees, and renewal fees.

Due to the ease of accessing these cards. Most users tend to misuse them. If poorly managed, credit card costs both in penalties and fees are usually very punitive.

This article is dedicated to giving tips to assist you to manage your credit card effectively. To understand the common credit cards terminologies, I have a fully dedicated article here.

credit cards

Pay your installments on time

Being a credit facility, credit cards usually attract installment payments. Mostly, these installments are paid every month. You should ensure to pay the installments fully and on time to avoid penalties.

Penalties tend to be punitive and compounded. The card issuer is required to send statements before the due date indicating the amount due. This is meant to prepare you in advance. Paying installments on time ensures card costs remain as minimal as possible.

Timely installment payment assists in building your credit score. A better score will ensure you access bigger and cheaper limits in the future.

Consolidate your cards

It is common to find people with up to 5 credit cards from different providers. In most cases, this is characterized as ineffective card management.

Firstly, it becomes difficult to keep track of the cards because of the amount of care and attention needed. You will need to use 5 times more effort managing the cards compared to the person with only one card. Hence, the need to consolidate your cards with one service provider.

Credit Card Terminologies That You Need To Know

Advantages of consolidating your cards

Instead of having 5 cards with a total value of $10,000, you can just take one card with the same limit. This helps minimize the challenges of late card payment, overspending, and over-leveraging. It also helps reduce the fixed costs.

Take a scenario whereby each card attracts a renewal fee. If you have 5 cards, then you will be forced to pay renewal fees 5 times. Hence card consolidation not only makes it easier to manage your cards but is also cheaper.

Paying more than the amount due

When paying your installments, it is advisable to pay more than the amount due. This helps in fast debt reduction. In addition, it assists reduces the other associated costs. A key example is the interest rates.

The faster you clear your debt the less amount of interest you have to pay. This is a similar case with the related fees including insurance fees.

To enjoys the benefits of a credit card, you should always strive to ensure costs are as minimal as possible. clearing your debt obligations should be your top priority always and the faster you do it the better.

Build a good credit score

A credit score helps lenders to determine your creditworthiness. Having good credit scores makes it easy to access a credit card with a higher limit and lower costs.

Building a good credit score is a continuous process that takes time to achieve. Some of the factors used to determine the credit score are;

  • Timely payment of your debt obligations
  • Frequency of taking debt
  • The amount of debt size taken
  • Age category

As the availability of customer credit data increases, credit scores have become more critical in determining creditworthiness. Lenders are using credit scores more than ever.

5 Credit Card Mistakes You Are Making And How To Avoid Them

Spending only when necessary

Because credit card is a debt, it should only be used when necessary. Some of the necessary uses should be in meeting emergency costs or short-term working capital needs. 

Spending credit cards on luxury spending is not recommended as it increases the debt cost. Debt is a cost in our lives and hence should be carefully used. It is advisable to only spend when there is an utmost necessity.

Though It takes time to master control in spending, if well done, it is one of the biggest financial successes you can ever attain.

Taking advantage of loyalties

It is common for most credit companies to use loyalties in marketing their cards and rewarding the lo loyal customers. Loyalties could be in the form

  • points
  • cashback
  • purchase price reduction.

For the points programs, you are allowed to redeem them in specific stores. The more points you have, the bigger the purchase during redemption.

Cash backs are refunds made after making a purchase. Purchase price reduction loyalties enable you to buy an item at a lower price than the market rate.

Before settling on a credit card provider, it is essential to do a proper check if they have loyalty programs. The goal is to settle on the provider with the best loyalty program.

Negotiating on the card costs

Credit cards attract various types of fees. These include;

  • Interest rates,
  • Renewal fees,
  • Over limit fees
  • Penalties.

Before settling on a card provider, you need to understand these costs well. This knowledge gives you an upper hand when negotiating.

Always practice negotiating with your card provider. In most cases, the costs are not fixed hence there is always room to push them lower. The best strategy for successful negotiations is to have a deep understanding of the market.

Conclusion

The above approaches are critical in ensuring you are managing your credit card well. The goal is to ensure the costs are at the lowest while benefits are maximum.

Debt has two sides. If used correctly, it helps us in meeting our financial obligations. If misused, it messes our financial situations further. You should live within your means and refrain from overspending and taking unnecessary debt.

This way, you ensure credit cards work for you and not against you.

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