Credit cards can be scary if you’re not accustomed to borrowing money, or if you’ve had trouble budgeting to include loan repayments in the past. However, if you use a credit card wisely, then they can be very beneficial. We are experts on all things loans, so have all the top tips on how to use credit cards wisely.
Before you even apply for a credit card, you need to consider your motivations and your finances. It’s important to only use a credit card to spread the cost of things you know you can afford to pay back in due time. You don’t want to completely depend on your credit card because that might mean you can’t payback what you borrow, leading to unsustainable debt.
If you struggle to pay your bills or need to put standard monthly costs onto your credit card then you might find yourself getting into larger amounts of debt. The best thing to do is to first look at your spending and create a budget.
Using a credit card regularly is fine, but this should be for making the most of money that you have. For example, using it to spread the cost of expenses like a holiday or a new sofa while knowing you can afford repayments, or using it to build up your credit score.
This is a good rule to follow for all varieties of loans. As a payday and instalment loan comparison site, we always advise that you only borrow money that you know you can afford to repay on time.
If you decide that using a credit card is a good choice for you, then you have to decide on your credit card company and the specific card you want to opt for. Different cards and companies will offer different benefits and different fees on interest and other payments.
Decide what you want to use your card for: getting the lowest interest on purchases, the most amount of time to repay debts or maybe the rewards for using your card? You can then look around and choose the card that best meets your requirements.
It’s vital that you understand the terms of your credit card. This means knowing your credit limit, understanding the interest rate, knowing the minimum repayments and understanding any additional fees. If you understand your credit card, then it helps you to use it wisely.
For example, when you know the limit of your credit card, you can ensure that you always spend within that limit to avoid additional fees.
If you’re looking to improve your credit score through your credit card, then you should also consider not spending too close to your credit limit. Credit Reference Agencies can look at the percentage of your credit limit that you regularly use as an indicator of how much you rely on credit and therefore gauge your financial situation. Experian recommends trying to use less than 25% a month of your credit limit. For example, if you have a limit of £1000, try to use less than £250.
Read the rest of the 10 top tips on Clear And Fair's website! https://www.clearandfair.co.uk/how-to-use-a-credit-card-wisely.html