Using credit cards can be a contentious issue for some, but did you know that there are actually ways to use a credit card to your advantage?
Credit cards can be a great way of demonstrating your financial responsibility, helping to make you an attractive prospect to potential lenders and giving you more freedom of choice when it comes to securing a mortgage or loan in the future.
Did you know that around 53% of all purchases made, are made using a credit card? This statistic just goes to show that credit cards are something most people use regularly, so perhaps if we had more education around how to use them wisely...we'd all be better off?
Here are some tips to help you get the most out of your credit card.
1) Understand Your Limits
The most important factor when it comes to credit of any sort, is to understand what your budget is and stick within it. This is where most people tend to go wrong. If a company is offering you a large credit limit, it can be sorely tempting to take them up on their offer - but if that means you're going to end up splurging without having the means to comfortably meet the repayments, then you're going to end up with bad credit.
The trick is to work out your household budget, and figure out exactly how much you can afford in repayments - then you can use this information to help you settle on a suitable credit limit for you. Once you have that figure, stick to it and don't be tempted to stretch beyond your means.
I always turn off the option for automatic credit limit increases on my own credit cards, choosing to manually review them and make a decision each time instead.
2) Never Be Late With Payments
This is one of the very worst mistakes you can make when it comes to credit. Did you know that around 35% of your credit score is based on your payment history? That's a huge percentage! If you are continually late with payments, your credit score is going to be very negatively impacted.
Most credit card companies also issue pretty nasty fines for late payments too - meaning it'll get more and more difficult to pay off your balance. One way I ensure this happens, is to set up direct debits to ensure my credit accounts are paid on time every month.
3) Pay In Full
One very effective way to ensure that your credit card is always working to your advantage, is to never spend more on it than you can afford to pay back immediately. This means that rather than using your credit card as an extension of your monthly budget - you're keeping your spending budget the same, but choosing to make purchases on your credit card with the intention of settling your bill that same month. This means you're getting to demonstrate how good you are with repayments, without risking getting in over your head.
4) Take Advantage Of Perks & Rewards
Many credit card companies offer perks for signing up with them - this can be a great way to make your credit card usage work in your favour. You may be able to benefit from frequent flyer miles, hotel reward schemes and various other things - if you use your credit card for your regular household expenditure such as food shopping and then pay it off each month, you're losing nothing but gaining points on your credit score and the perks on offer too!
If you're interested in this topic, you can click here to learn more about how to make your credit card work for you as well more advice on debt management.
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