Today’s digitized financial world allows consumers to make their daily transactions with the use of credit card, debit card, and mobile apps. When it comes to personal finances, like purchasing a house or a car, a credit card proves to be an excellent financial tool. The credit cards have become the most convenient and common instrument in conquering financial responsibilities. When used responsibly, this plastic money actually offers many benefits, and also brings in many disadvantages that we really need to watch out to make them part of our life.
Carrying half a dozen credit cards from an array of banks or other institutions is normal these days, however, not paying bills on time can end you up in a huge amount of credit card debt. The students carry many credit cards while studying in the college, and they graduate with a high debt.
The credit card is a delightful gift only if you pay your bills within an interest-free period. The credit cards are a free short term loan and are proven to be the cheapest form of modern short-term credit facilities. Before you harvest over a thousand dollars of benefits, you really need to learn the basics, legal usage and understand the fundamentals of credit cards.
Basically, what is a credit card?
Credit card, commonly known as plastic money, is a rectangular piece of a card made up of plastic, graphite or a metallic alloy. This thin card identifies a financial account and is issued by banks, financial institutions or some shopping stores. It contains a magnetic strip on the back, a RFID chip, account number, owner’s name or business name. These help you keep track of your spending and allows you to freely download transaction history.
The credit cards have replaced currency notes and have found a permanent place in our wallets. These allow you to borrow money from the bank, instead of directly removing funds from your account. When you don’t have cash, you can make purchases with your credit card on a condition to pay the borrowed amount within the “grace period” of 25-30 days. If you pay back money in full by the due date, you will not pay interest, but if you missed the payment, you will have to pay the interest on top of what you borrowed from the bank.
The best way to manage your credit cards is never missing a payment, and don’t pay them off completely.
Solid Reasons Why You Need A Credit Card
#Offers 0% Interest On Borrowing.
The credit cards are the cheapest way of borrowing money to make purchases, clear out existing debt or build up new debt.
#Earn Rewards or Perks.
Many cards reward you points or cash for booking a hotel reservation, a flight, or shop at the store with credit cards compared to cash or debit card. They save you a lot of money and offer extended warranty, rental car insurance, purchase protection and more.
#Build Good Credit Score
The good credit history means you can acquire future loans or a mortgage at best interest rates when you need it. Having a credit card will help you build your credit score and get lower insurance premiums.
#Cheap Money for Travel Savvy
The credit cards provide you consumer protection (Section 75), it covers foreign purchases as well as domestic purchase protection. Get the best possible exchange rates. This is the most convenient and easiest way of making payments while you are traveling. The reason being the companies abroad get assured to recouping any additional costs.
#Free Purchase Protection
If an item bought through your credit card is stolen within a set period of time, which is usually 90 days, you will get your money back. You are also not liable to pay for the money spent after you lost your credit card, on condition that you reported promptly about the loss.
Remember These Five Golden Rules When You Own A Credit Card.
1) Never miss a payment/due date. Set up a direct debit for the minimum amount of payment to ensure that you always pay before the due date.
2) Enter fewer details and minimize your applications to earn greater chances of approvals from your borrowers. The credit card providers check your credit record to ensure you are able to pay back, and most likely to accept your application.
3) Always use your credit cards, never let them lie in your closet unused. Having many cards lying unused will affect your credit score. So, for accessing better deals, rewards and future interest rates use your credit card sensibly.
4) Cancel your credit cards if you no longer want to use them. This will help you build a good credit card score.
5) Make sure you know the details of your credit cards such as the interest rate, fee charges, and when the deal is going to end. This way you will never risk accidental payments of interest or fees.
This just covers the basics and if you have more thoughts to share, please leave your comments below.