How to Eat Your Cake and Have it Too – Make the Best Possible Use of Credit Cards

We’re a nation of debtors, and we owe most of our debt to those ubiquitous pieces of plastic we call credit cards. They were invented for our convenience, but somehow, they’ve become the main villain of personal finance. Any finance guru is going to ask you to get rid of your cards, cut them up, or put them on ice. But those who are financially savvy know that credit cards are the best way to build up good credit history, just as they also know that they’re also the fastest way to screw up a good credit history. They’re also aware that with credit cards, you can eat your cake and have it too, and if you’re wondering how, read on:

  • Use your credit cards as much as possible: Now I know this is against conventional credit card wisdom, but if you pay your bills on time and in full, this is the best possible way to use your cards. When you pay for whatever you buy using your credit card, you’re borrowing money that’s interest free; and because you don’t use your own cash, you’re also gaining interest on the money that remains in your checking or savings account. So it’s a win-win situation for you.
  • Pay up, in full, and on time: When you use your credit card for most of your purchases, you need to remember that the above point is advantageous only if you pay your bills, in full and on time. When you pay just the minimum amount due, the rest of the money you’ve spent accrues interest at an alarming pace, and before you know it, you’re deep in the hole of credit card debt. Ensure that you spend only within your income when you’re using your credit card so that’s it’s not a burden to pay your bills every month.
  • Limit the number of cards you own: When you own just two or three cards, it’s not hard to keep track of what you’re spending your money on. Use certain cards for designated purposes so that your expenses are distributed over all the cards you won. If it is not possible to limit the number of cards because each has a spending limit, then keep tabs on your cards, how much you’re spending using each, and when their bills are due. When you maintain accounts scrupulously, you become more conscious of your spending habits.
  • Set up an automatic debit facility to pay your credit card bills: If you tend to forget to pay your bills or if there are too many dates to remember, set up an automatic debit facility with your bank so that they’re paid on time. Your statement is usually sent to you before the last date, so you can check its veracity before the amount is debited from your account.

Credit cards are your best friend, if only you know how to use them wisely.