author avatar

9 Tips in Using Your Credit Card Responsibly

Mon Sep 11 2023

Credit cards can be beneficial and can come in handy when doing purchases. It has lots of benefits however, when not used and managed responsibly, it could cause the owner to drown in debt and have a long-term negative impact to his or her financial health. To maximize the benefits of using credit cards to its full potential, here are some tips that can help you handle your credit cards responsibly;

1. Understand the terms and agreement of your credit card carefully.

When you open a new credit card account, the first thing you should do is read the credit card customer agreement and the account opening disclosures thoroughly. Usually, these terms and agreement conditions are provided to the applicant before the application, and when approved, is emailed to the applicant together with the credit card.

By understanding the rules and guidelines of the lending company, you'll know what to expect in terms of due dates, fees, interest rates, and other details.

2. Pay your card bills on time or before the due date.

You should avoid missing paying your payments and always make your payments on time. This is because your payment history is a significant factor in your credit scores. Missed or late credit card payments can not only harm your credit, but they can also result in late fees and interest rate increases.

You could think about setting up automatic payments or electronic reminders to help you pay on time.

3. Set up alerts.

To avoid missing your payment schedules, you could think about setting up automatic payments or electronic reminders to help you pay on time. You can now set up real-time alerts with many lenders and credit card providers so that you get an email or text each time your card is used. You can then notify the business of the error and challenge the charge if a vendor triple bills your account for a single item.

4. Follow the Snowball method in paying off your debts.

If you haven’t heard about the snowball method, it’s a popular method of paying off debt that is commonly recommended by lending companies. Here’s how it works;

  • Pay off the account with the lowest balance first. To pay off the debt as quickly as possible, you should put as much money as you can into this account. At the same time, you will continue paying the minimum amount due on all other accounts on time to avoid late fees.

  • Once you’re done paying off the account with the lowest balance, allocate your remaining amount to the account with the next lowest balance while still paying the minimum amount to the other accounts on time – again to avoid late fees.

  • Just keep repeating the process until you have paid off all your debt balances.

This method works for many but it doesn’t necessarily mean it will work for you too. You can maybe try other methods you feel is more efficient for you in managing your debt balances.

5. Track your spending.

Studies show that using a credit card as opposed to a debit card or cash makes it much simpler to overspend. That's why it's a very critical responsibility to track and understand precisely where your money is going each month. Until your bill arrives, that tiny piece of plastic may feel like counterfeit money which you have to be very conscious of handling. Making a monthly budget, whether using an app or the more traditional pen and paper method, has proven to be helpful for many people in keeping track of their hard-earned money. They can manage their credit card debt and other obligations by sticking to their budget.

6. Do not overspend.

Charge only what you can afford to pay off on your credit card. Pay off the entire balance on your credit card or at least the minimum amount due on or before your due date to keep your credit card in good standing and receive all of its benefits.

7. Stay below your credit limit.

Use only your credit card when it is truly for a necessary purchase. And, it is even better to keep well below your credit limit. Why? Your credit utilization ratio—how much of your available credit you are using—could have an impact on your credit scores. Additionally, your credit score may be better the lower your credit utilization ratio. Most lending institutions advise utilizing no more than 30% of your credit limit.

8. Regularly monitor your credit report.

You should always keep a close eye on your credit. You can stay on top of your situation by keeping an eye on your credit. It's also a further way to assist you in identifying mistakes and potential fraud attempts that might be damaging your credit. To monitor your credit report regularly, you can request for a CIC credit report in person to your lending company or refer to online websites such as the CIBIApp and apply to check your credit score.

9. Build your own emergency fund and do not heavily rely on your credit card.

Emergencies arise, and in an ideal world, you would be able to use your savings rather than relying on a credit card to cover an unplanned expense. If you don't already have one, setting up your emergency fund as soon as your credit card debt is under control should be one of your top priorities. In general, a much better safety net for these circumstances is an emergency fund.

Credit cards can be a useful tool for financial matters such as building credit, traveling, handling emergencies or unforeseen expenses, and earning rewards. A rewards credit card gives the cardholder rewards for making purchases, as the name suggests such as cash back, discounts on gas station purchases, to name a few. One of the main benefits of credit cards for those who use them frequently is the ability to earn rewards. However, just like anything else, credit cards can be dangerous when used recklessly, and can be very advantageous if you learn how to use them sensibly and obediently. There are numerous benefits to continuing to use credit cards, which can make your life much more convenient.

Please study the terms and conditions in the Disclosure Statement before proceeding with a loan transaction. All loans under Plentina are financed by Plenitna Lending Inc. (SEC Registration No. CS20200001117, Certificate of Authority No. 3266).