The word ‘credit card’ can arouse different emotions in different people. In some people, it can evoke the need to run on a spending spree. For some, it may just spell convenience and comfort all summed up into one. For some others, it may be a ticket to financial flexibility and spend ability. While for another bunch of people, credit cards are a resourceful money making proposition. All you need to do is beware of its pitfalls, and you may just have gotten yourself a regular source of income from credit cards. First of all, the credit free period provided by credit card issuers represent an offer hard to miss. People run to make the most of this offer as it gives them the golden period of up to 50 days interest free period. With interest rates rising higher by the day, there is nothing that can beat this offer. But here is the catch. In order to enjoy an interest free period, you must always clear your monthly billing statement on or before its due date. If this principle is adhered to, then nothing can keep you away from such interest free days. If you only clear the minimum amount due from your monthly statement, then you will be burdened with high interest rates on the outstanding amount in addition to the interest free period running out of your hands. If you possess multiple credit cards, then extra care must be taken to keep a track of the different billing cycles and their due dates. Never miss out on a payment as it would lead to exorbitant interest rates levied on the pending amount plus the hefty late payment charge which would disengage your carefully designed financial goals. When clearing your credit card balance with a cheque, we might often believe that once the cheque has been dropped in the drop box, our responsibility has been done. This is not true as the bank considers the payment not to be made until the amount has been credited to its account. Thus, always make sure that you drop the cheque at least 2 or 3 days prior to the due date.
When selecting a credit card for yourself, opt for one that best suits your personal needs and requirements. For instance, if you are a frequent flyer, you can get the best value for money if your credit card has been teamed up with different airlines. Every time you spend, reward points will be credited to your account. Co-branded cards may offer better value for money. However, you will be in a win-win situation only if you spend money on those specific goods represented by the card and its brand. In order to understand your card’s value program, read all the terms and conditions carefully. Although the main motto of reward programs is to encourage all their credit card users to spend in an uninhibited manner, do not go all out and fall for the trap. Spend in a conservative manner, in accordance with your needs and requirements. Often, people may believe that personal loans are the best option when borrowing comes to your mind. The reason why people believe this may be because credit cards are an extremely expensive option owing to their high interest rates. However, if you have shown good financial discipline to your bank, chances are that you may get a loan from your credit card at a much lower interest rate than that offered by personal loans. But the disadvantage lies in the fact that when you have opted for a loan against your credit card, your credit limit will fall.
Managing your credit card well does not limit its advantages to reward points, interest free days or cash backs. You will enjoy enormous financial support with a robust credit history and good financial discipline, and yes, the all pervasive credit score. High credit scores show excellence in financial behavior and no bank will ever hesitate in giving loans to such a credit card user, that too at comparatively less interest rates. Sometimes, banks may also be generous to help such customers in their big value purchases by converting their payment into convenient Equated Monthly Installments or EMIs. Credit cards are good teachers that show you your spending pattern, helping you assess and analyze them, thereby deciding if you are on track with your financial goals. If you are wise enough to use your credit card well, then several opportunities will open their doors for you, helping you grow financially.