Three simple ways to manage your credit card effectively

• Follow

Credit cards, sometimes referred to as ‘plastic money,’ are the most popular substitute for cash for many people. They are pretty helpful to those short on money, as they allow the cardholder to purchase goods or services and then settle the amount to the credit card issuer later.

Further, the credit card comes with charges for the users related to late payments, typically rather expensive. The ongoing coronavirus outbreak has already instilled panic in individuals concerned about their financial stability in the face of a failing economy.

If the due date for credit card payment is missed, the credit card issuers often levy a penalty. Numerous credit card companies charge a penalty rate of up to 40% on the outstanding amount. Additionally, the increased interest rate is applied to any future purchases or cash withdrawals – even if the credit card payment has been paid on time for six consecutive months. At present, most credit card users are concerned about high-interest rates and are scared of falling into a debt trap due to excessive use.

Let’s take a look at how credit cardholders must exercise caution:

Check your terms and conditions

Understanding the terms of service or terms of usage is the first step toward managing your credit cards. Although very few people read them, there is a reason you must do it. Remember, it is not a sales pitch but the actual terms and conditions included in the booklet that comes with your new credit card.

In an ideal world, you should be familiar with them before applying for a credit card. You can read the terms and conditions of the card for which you are applying online. It is also a great way to remind you of the minimal amount you need to incur on each of those credit cards each year to keep them free and prevent you from paying any fees for using them.

Streamline your payments

Always make a credit card payment using ECS from your bank account. It makes no sense to use your credit card for a little loan or to roll over an overdue balance to the following month, as credit card interest rates are incredibly high. This is the sole reason you should propose that you pay your credit card invoices in full using ECS from your bank account to your credit card. Consider alternative lending options if you truly require one. Even a personal loan is preferable to a credit card debt.

That said, never use your credit card for cash withdrawals, as this incurs an additional interest charge. Simply remember never to purchase anything with your credit card if you believe you will be unable to pay it off by the due date.

Your fear can cost you

On the flip side of the coin, many people are also fearful of using a credit card. Further, so they are considerably more scared when they use it online. This does not imply you should use your credit card everywhere online, but if you see a reputable Internet payment processor or items that Visa on the site has validated, you should be better using your credit card there.

Also, if you see a transaction on your credit card account that you are sure was not made by you, contact your credit card company to have your card blocked and file a complaint about the transaction. They would conduct an investigation and refund your money for the transaction. Make this request only if you are certain; else, you may be charged a fee for the frivolous complaint.