How to manage your Credit Card expenses |
Posted: March 29, 2017 |
Your favourite piece of plastic is indeed an ideal way to shop, but a little carelessness can push you under enormous debts. You need to use the credit card the right way, keep a tab on your spending and manage your expenses well to keep your financial life healthy. By imposing monthly spending limits and using your card as a budgeting tool you can save yourself from the skyrocketing interest rates that the credit card companies charge. Here are some smart ways that will help you manage your card expenses well. Monthly spending plan- The easiest way to stay on budget it to create a monthly spending plan and set self-imposed limits of spending. This will ensure that you do not spend beyond your means. Have realistic goals for essential expenses like groceries, clothing and travel. Then make room for other luxuries. Resist impulse buys as they can spoil even the most carefully planned budget. Check your weekly purchase activities to ensure that you are staying within the set budget. Review your credit card bill- Check your credit card bill once in 2 weeks. You can get the statement online. Review each transaction and query something that you don’t recognize. If you find some unknown charges contact the card provider immediately. It is a good habit to keep the credit card receipts of each month handy. This way you can easily match them against the transactions of the statement and verify whether you are charged the right amount. Pay the balance in full each month- Though you are required to pay only a minimum balance to keep your account in good standing, this amount is only a fraction of the total credit card debt that you owe. If you do not pay the credit card balance in full you will have to pay a very high interest rate on it. You will soon rack up a big amount of debt that will become unmanageable. Your inability to pay off the credit card debt will affect your finances and future credit usage. Hence make it a habit to pay off the entire outstanding balance each month. It will improve your credit utilization ratio and give a boost to your credit score. On time payment- Check your credit card statement and make sure you always make the payment before the due date. This will help you to avoid late payment charges or extra interest charges. Late payments damage your credit rating and make it harder for you to get loans in future. It is best to set up a direct debit to pay off the full amount each month. Stay within the credit limits- If your outstanding balances run too close to your credit limits, it is an unfavourable sign for your credit score. A high credit utilization ratio means that you are overly dependent on debt. Ideally you should not use more than 30% of your credit limit. If you are sure you can repay the amount you may also ask the credit card companies to increase your limit. But make sure you are not tempted to get into more debt. Spend only the amount that you can easily afford. Do not use cash withdrawal- Unless extremely necessary do not use your credit card for cash advance facility. You will be charged a fees for the withdrawal. Moreover there is no interest-free period in this case unlike the usual purchases and the rate of interest is extremely high. As far as possible swipe your card for the purchases or take a personal loan if you are in dire need of funds. A personal loan is a much better option as the interest charges are much lower in this case. A credit card should be used as a resource to be organized, keep track of your expenses and reap the benefits of reward points. Never use it to buy more than what you can afford. Manage your expenses well and use your card responsibly to build a good credit score and secure your future financial life.
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