Having a credit card can be a wonderful thing. While no one likes racking up debt, a credit card can save you from unplanned, unexpected financial pressure. The key to having a credit card, is of course to manage the payment thereof appropriately. If you have a structured plan with the repayments on your credit card, it can be smooth sailing all the way.
However, a credit card also runs the risk of becoming a financial grievance – if you don’t manage it correctly.
DDon’t be put off having a credit card – there are some simple and easy ways to manage your credit card correctly to make sure you don’t end up with hundreds of thousands in debt. Here are our top 4 rules when it comes to managing a credit card:
Don’t exceed your credit limit
- Your credit limit is set when you first get your credit card
- The idea is to (naturally) stick to this limit and not exceed it
- There will be consequences when you go over your limit
- This usually amounts to a flat fee you will be charged or hiked interest
- It’s also good to stick to the limit for your own peace of mind. Remember, a credit card is not a debit card. You are essentially not spending your money.
Pay off the owed amount in full each month
- You will receive a statement from your bank each month with an exact amount payable on your credit card
- You should always strive to pay that amount off in full
- Should you pay less than the amount billed, you will end up paying a lot of interest
- If you don’t ‘clear’ your card every month (i.e. paying the amount you are billed for) the interest occurred on these amounts grows and grows, thus landing you in even more debt
- Make sure you know exactly how the interest charges on your specific card work, so you know what is in store for you
Try to pay off more than the minimum amount
- The minimum amount payable on your credit card every month is usually quite small, which sounds manageable, but could end up costing more in the long run
- Thus, if you can, try and pay more than the minimum prescribed amount each month
- This way, you’ll end up saving money
- Naturally, the more you pay off, the less interest you’ll end up paying and you will also end up paying of your credit card quicker
Double check your statement
- Take time to thoroughly read through your statement each month
- Write down how much you pay each month and how much you still owe and keep everything filed and on record
- Work your credit card payments into your monthly budget