Credit cards are fascinating and efficient financial tools that allow the cardholder to avail easy credit when required. Irresponsible credit card usage can land cardholders into vicious debt traps that are extremely difficult to escape. Contrary to this, if used responsibly credit cards turn out to be extremely useful tools to effectively manage expenses and save money. Responsible credit card usage not only improves finances and credit scores but also provides numerous benefits in the form of cashback and rewards.
To make sure you extract the maximum benefit out of your credit and avoid irresponsible usage that might land you into a debt trap, we’ve come up with 5 of the most important Dos and Don’ts of Credit Cards.
Very often people just randomly pick up any credit card they are offered which is not the right approach to extract the maximum benefit out of credit cards in the UAE. To make sure you can utilize your credit card to the fullest it is vital to identify the purpose of applying for a credit card. Is it air miles? Cashbacks? Free Movie tickets? Offers on dining?
You can make use of online web aggregators to compare various credit cards and the benefits offered by different credit card providers. By making a valid comparison you’ll be able to choose the cards that suit your requirements perfectly.
Predictably, best credit cards with premium perks and benefits are offered to customers with the best credit score. In order to make sure that you get the best credit card that fits your requirements and offers the best rewards, it is crucial to be aware of your credit score in the UAE. A clear idea of your creditworthiness will help you to shortlist cards that are suitable for you.
A credit card is a type of unsecured loan that is offered without any sort of documentation. Delaying the repayment of debt will accumulate interest over the principal amount which makes it difficult for the debtor to repay the amount. Furthermore, the rates of interest that are applicable to credit cards are very high. In order to make sure you’re not stuck with huge amounts of debts that are extremely difficult to repay it is recommended that one should repay the amount without carrying any balance.
If you are someone who’s bad with remembering dates you can always choose to pick up your credit card due dates. Most of the credit card providers provide online access to portals from where cardholders can schedule repayment due dates so they do not miss out on any of their credit card repayments.
To make sure you have credit limit available to counter strokes of financial emergencies it is advisable not to spend more than 20% or 30% of the available credit limit. Cardholders that max out their credit cards frequently are more likely to get stuck into debt traps in comparison to cardholders that utilize their credit limits responsibly.
One of the direct and major benefits that credit card yield are rewards. Various credit card providers and cards come with different offers. In order to extract the maximum benefit out of your credit card, it is advisable to make consistent repayments so as to utilize and redeem accumulated credit card rewards. Credit card rewards include air miles, cashback, discounts on partnered outlets, free movie tickets, etc.
Approximately twenty percent of your credit rating depends upon the length of your credit history, of which the age of your credit accounts is an integral component. A longer credit history helps significantly to improve the credit score of an individual. Furthermore, a closed or deactivated credit card essentially means that you are lowering your credit score. Keeping old credit cards and using them once in a blue will help you to improve your credit score to a great extent.
Credit card debts are common and affect most of the cardholders. Most of the credit card providers offer cards with a balance transfer facility in order to counter the issue of debt accumulation. The balance transfer facility allows cardholders to transfer debts from old cards to new cards which helps cardholders to manage repayment without getting stuck into a debt trap.
Missing the due dates of credit card payments leads to uninvited trouble hence, it is always better to pay bills on time without carrying a balance ahead. If you are running tight on finances it is advisable to make the minimum payment instead of skipping the payment entirely. Following this approach not only saves money by avoiding late payment but also helps to maintain a healthy credit score. If you have issues remembering repayment dates you can make use of the auto-debit facility that is offered by the majority of credit card providers.
Wrapping it Up
Simply put, this tiny modern-day plastic tool can be a highly beneficial tool to help you manage your expenses efficiently along with building up a healthy credit score. However, holding a credit card is a responsibility that must be taken seriously. Like various other tools, the utility of credit cards depends upon the skillset and knowledge of the user and in the end, it entirely depends on the user how they make use of the tool.