Using Credit Cards Wisely and Making the Most of It

Using credit cards is advantageous if you want to build a strong credit record. Individuals also take advantage of the convenience and buying power of credit cards. However, misuse of credit cards may result to one getting into a cycle of debt. By considering the following things, you can avoidthe pitfalls of using credit and have your credit card work to your advantage.

Getting Rid of Interest.  One common big mistake of consumers is purchasing items on a credit card account that they cannot afford to pay off by the end of the next billing cycle. With just the minimum payment applied to the balance each month, they are usually confronted with high interest charges — with most credit card companies charging as high as 30%. It becomes more difficult for consumers to get out of debt. It is imperative then for consumers to address interest payments by paying down debt.  It is suggested to charge only amounts you can repay each month when using your credit lines and not allow credit to revolve from one billing cycle to the next.

Making Use of Credit Card Rewards. Choose a card that offers you rewards points for all of your purchases, considering a rewards program that matches your spending habits. You can enjoy cash back, free travel or other perks by utilizing rewards credit cards.  Most credit cards don’t charge an annual fee to enroll in a rewards program.

A Wiser Way of Spending Cash Rewards/Points.  If you want to maximize the value of your rewards points, it is better to put them towards your balance instead of spending them on more purchases.  This way you would be not only paying down the debt but at the same time lowering your interest.

Benefiting from Extended Warranties. Consumers can benefit from extended warranties offered for free by some card companies like American Express and Visa. If you are a cardholder of these credit cards, know if you can enjoy a minimum of an extra one year of protection for your electronics or other items.

The above are just some of the ways to make credit cards help you and save you money. By being knowledgeable about the various issues surrounding credit card misuse, you can avoid the pitfalls of using credit.

Credit History. Paying card balances on time and above the minimum payment are things to consider in establishing a favorable credit history. If you are going for more attractive loan rates and higher lines of credit, you should show a consistent bill payment history.

Debt-to-Income Ratio.  Creditors look to debt-to-income ratio to know how much of a consumer’s gross monthly income goes toward debt payments. A low debt-to-income ratio of 15% or less is highly favorable, while a debt-to-income ratio of 20% and up is indicative of a consumer’s difficulty of repaying debts.

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