CREDIT CARD – Here are some of the best practices when using them to increase credit score and make purchase more convenient.
A credit card is a plastic or metal card issued by a financial institution, such as a bank or credit union, which allows the cardholder to borrow money up to a predetermined credit limit.
The bank decides on a certain amount of money you can borrow. This is called a credit limit. The limit is determined by the issuing financial institution based on factors like credit history and income.
When you use your credit card to buy something, it’s not taking money directly from your pocket. Instead, it’s borrowing from the bank. At the end of the month, the bank sends you a statement, showing all the things you bought with your credit card during the month.
You need to pay back the money you borrowed from the bank. If you pay it all back before a certain date, usually called the due date, you won’t have to pay any extra money.
Credit cards can be pretty cool because they offer some bonuses too! Some credit cards give you rewards, like getting some money back or earning points that you can use to get fun stuff. It’s like a little thank-you from the bank for using their card.
Here are the best tips when using credit cards:
1. Each month, pay down the remaining amount
One way to profit from not paying interest on credit card purchases is to pay off the entire balance at the end of each billing cycle to avoid paying interest.
2. Put needs before wants when using the card
It’s important to use credit cards responsibly. Excessive spending might result in debt.
3. Don’t ever forget to pay
Your credit score may suffer, along with penalties such as interest rates and late fees, if you fail to make a payment.
4. Utilize your credit card as a tool for budgeting
Consider using a credit card as a tool for budgeting if you are certain that you can use it sensibly and pay off the debt each month.
5. Make use of a reward card
It makes sense to use a credit card that offers rewards if you use it for the majority of your expenditures.
6. Don’t use more than 30% of your available credit
Retaining your credit utilization ratio below 30% is one strategy to maintain a decent credit score.