A Simple Guide to Understanding Credit Cards

 

It can be tempting to put charges on your credit card every time you can’t afford something. But you probably know this isn’t the right way to use credit. You may not be sure what the right way is. Therefore, read on for a simple guide to understanding credit cards.

 

What is a Credit Card

First step, let us define what is a credit card?

A credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services.

Therefore, let us learn some essential things about credit card use, so that you use your credit card properly from now on.

The credit card that you use to make purchases is very important and you should try to use one that has a very small limit.

This is good because it will limit the amount of funds that a thief will have access to.

 

Merchant Fees and Surcharges (Understand Credit Cards)

If you go to make a purchase with your credit card and you are told that there will a surcharge for using that payment method, you can refuse to pay it and demand they accept your purchase.

Many credit card companies do not allow merchants to impose fees.

Be sure to check out the policies of your card company.

If you are going to make purchases over the Internet you need to make all of them with the same credit card.

You do not want to use all of your cards to make online purchases.

Doing so will increase the chances of you becoming a victim of credit card fraud.

 

How to Use Your Credit Cards

If you need to use credit cards, it is best to use one credit card with a larger balance, than 2, or 3 with lower balances.

The more credit cards you own, the lower your credit score will be.

Use one card, and pay the payments on time to keep your credit score healthy!

If you are determined to stop using credit cards, cutting them up is not necessarily the best way to do it.

Just because the card is gone doesn’t mean the account is no longer open.

If you get desperate, you may ask for a new card to use on that account.

You will once again be trapped in the same cycle of charging you wanted to get out of in the first place!

As you continue to use your credit card responsibly, you will be subject to more favorably interest rates.

This will also afford you the options of credit card limit increase in no time at all.

Keep in mind, the biggest mistake you can make with your credit card is to not pay (at least) the minimum payment by the due date.

Missing a payment will result in late fee charges. Missing a payment for more than 30days will affect your credit score adversely.

Therefore you should seek to avoid this at all cost.

 

Spending Limit  (A simple Guide to Understanding Credit Cards)

You should aim to spend no more than 30% of your credit card limit.  The lower, the better.

Do not go over your spending limit.

Even if your card has one, there can be scenarios due to electronic reporting delays and the like where you can actually go over your limit.

Given the fees and charges for going over your spending limit, some credit card companies make it easy for you to do so.

Do not assume they are putting a hard ceiling in to protect you.

Never do a balance transfer for the wrong reasons.

If you have checked out all of the details and it sounds good, you have to make sure it is still worth the hassle.

How long have you been with the other company and how much money is this going to save you?

If you’ve been guilty of using your credit card incorrectly, hopefully, you will reform your ways after what you have just read.

Don’t try to change all your credit habits at once.

Use one tip at a time, so that you can develop a more healthy relationship with credit and then, use your credit card to improve your credit score.

 

Bottom Line  (A Simple Guide to Understanding Credit Cards)

 

Credit cards offer you a line of credit that can be used to make purchases, balance transfers and/or cash advances.

The goal is to use no more than 30% of your credit card limit.

When using a credit card, you will need to make at least the minimum payment every month by the due date on the balance.

As you continue to use your credit card responsibly, you will be subject to more favorably interest rates.

This will also afford you the options of credit card limit increase in no time at all.

Keep in mind, the biggest mistake you can make with your credit card is to not pay (at least) the minimum payment by the due date.

Missing a payment will result in late fee charge. Missing a payment for more than 30days will affect your credit score adversely.

 

This post is a simple guide to understanding credit cards so you can use them responsibly to build credit and increase your chances of even more future loans.  Bookmark this post for future use and reminder.

Share with others so we can all become more money conscious and make better financial decisions.

 

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Cheers!