Master the use of your credit card with this smart guide
Discover practical ways to make good use of your credit card!
By following the recommendations we provide below, you can use your card smartly, avoiding risks and maximizing its benefits.
Check out the following tips to learn how to manage your personal finances:
Avoid lending your card
Lending out your credit card can lead to financial problems. Many individuals end up with debts and a negative credit history because the loan was not repaid by the third party.
Therefore, it is better not to lend your card. Remember that it is a personal resource and any inconvenience related to it will be your responsibility.
Even if it’s someone you trust, think twice before lending money.
Manage Your Expenses
Using technology makes tracking your expenses easier. Several banks provide apps that enable monitoring your purchase history, helping you to keep track of every payment and understand how much you can spend in a month.
If your bank does not offer this tool, keep your expense sheet updated daily. Monitoring your payments will help you avoid unpleasant surprises.
Prefers cash payments
Making cash payments is usually more advantageous. In addition to receiving good discounts, you will avoid accumulating debts.
Certainly, there are times when installment payments are necessary. For instance, if your refrigerator breaks down and you don’t have enough money, use your card, but split the amount into a few installments.
Try to pay the fewest number of installments possible, as the interest can increase the total cost. Make sure the debt fits into your monthly budget.
Set an appropriate limit
To maintain financial control, adjust your credit card limit. Some institutions increase credit for good payers, but this can be risky.
Imagine having a limit of 8,000 pesos with a salary of 3,000 pesos. The temptation to spend increases and so does the risk of debt.
We suggest that you keep your credit card limit below 30% of your monthly income. If it exceeds this amount, you will need to have a stricter control over your expenses.
Use a spreadsheet to monitor your expenses.
Use only one credit card
Having multiple cards can lead to excessive spending. The combined limits can exceed your monthly income, causing purchases beyond your means and making it difficult to pay off debts.
To avoid this, concentrate your transactions on a single card. This will make it easier to track payments and control your expenses.
Pay the bill on time and in full
Never delay the payment of your credit card bill. Interest rates are high and small amounts can turn into large debts.
If the bill is high, it is not advisable to only pay the minimum and leave the rest for the next month. This leads to revolving credit, which also has high interests.
Failure to make payments can trigger a snowball effect of debts. Therefore, always make sure to pay the full amount of the bill and keep a low and manageable limit.
Create a financial plan
To keep your finances balanced, align your expenses with your budget. The rule is simple: never spend more than you earn.
First, gather all sources of family income (salaries and additional earnings) and have a clear understanding of how much money comes in monthly. This will be your income limit for the month.
Next, you should create a spreadsheet to keep track of all expenses. Write down the amounts of each invoice and receipt.
This tool will help you visualize fixed and variable costs. If using a spreadsheet is challenging for you, there are other financial management tools available, such as apps or even a notebook.
It also sets a savings goal. For example, cutting non-essential expenses until saving 20% of your monthly income.
This amount should be allocated to an emergency reserve.
Take Advantage of the Benefits
Credit cards often come with loyalty programs. Every purchase earns points (or miles) that can be redeemed for products or services, such as cosmetics, tickets, or discounted airfare.
However, be mindful of possible traps. Some affiliated stores may inflate prices.
In addition, some mileage programs may have additional costs. Make the necessary calculations to verify if the benefits are truly worthwhile.
