How Do You Use Credit Cards Wisely?: Cracking The Code

In today’s digital-money world, credit cards are an indispensable tool. Almost no one is taught how to use a credit card before getting one, but, like any tool, using credit cards properly is critical. In this guide, we’ll answer the question, “How do you use credit cards wisely?” turning your money journey from survival mode to success.

How Do You Use Credit Cards? Here Are The Basics 

How do you use credit cards? It’s not something we are taught in school. You likely signed up for your first credit card before considering this question.

Let’s keep it simple. A credit card isn’t just plastic or free money; it’s a way to borrow money from a lender up to a limit. It’s not like a debit card that takes money straight from your account. You borrow money from your credit card company, agreeing to pay it back by your due date, or you will be charged interest on the card balance.

It’s essential to understand the terms of your Credit Card Agreement. You need to understand your credit limit and APR. Annual Percentage Rate (APR) is the cost of borrowing money on your credit card. The average credit card APR or interest rate is usually between 19%-25.99%.

Credit card companies make a lot of money because most people don’t know how to use credit cards properly,  carry a monthly balance, and pay them a lot of interest.

Let’s cover some of the basics you need to know to use credit cards properly:

• Credit is not free money – you need to pay it back within a set period, or you are charged interest
• Understand your billing cycle and payment due dates
• There is usually a 30-day grace period before interest is charged – check your cardholder agreement for details
• Understand how much you would be charged if you don’t pay the bill on time (divide APR by 12 – then multiply that by your outstanding balance)
• Rather than focus on the Minimum Monthly Payment, commit yourself to always paying the bill in full.
• Avoid taking cash advances on your card. They cost you more in interest and typically aren’t eligible for the grace period, so advances start accruing interest immediately.
• How you use credit cards will affect your credit score and can affect your financial life for years to come.

Making Credit Cards Work for You

So, how do you use credit cards to your advantage? Get the good stuff by using credit cards the right way. Here are the top tips on getting good with credit cards:

• Understand your budget and income well before spending on a credit card.
• Only spend what you can afford to pay off right away.
• A credit card is not an emergency fund – Prioritize building an emergency fund in a high-interest savings account.
• Don’t save your credit card details on websites – putting one step between you and a purchase can help keep spending in control.
• Don’t make your credit card bill an afterthought; never miss a payment.
• Avoid carrying a balance and building up more debt than you can repay.
• Track your credit card spending to be more aware of your spending habits – it can easily slip away from you.
• Commit to yourself to pay your bill in full each month.
• Turn on credit card alerts to stay in the loop and catch fraudulent activity quickly.
• Using credit responsibly can help you build up a good credit history that will benefit you in the future.