Credit Card Tips for Individuals with Low Income

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  | Published: 04 February 2020 | Last Updated On: 12 January 2021

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When you step into the professional world, you tend to get your first credit card. And when you’re in a country like the United Arab Emirates, you tend to get your first credit card in UAE as soon as possible. This is because of the many shopping events and discounts happening around the beautiful country. That cut out flashy plastic embossed with numbers sure does feel nice, but there are a few things to keep in mind when it comes to dealing with credit.

One should never forget that a credit card is a financial instrument and not an opportunity to avail endless credit.

If a credit card in UAE is managed well, it can tremendously help in building your credit score, however, it can also damage your credit score if not used in a proper manner. With a good credit score, you will be in a position to avail bigger loans in the future.

Credit Card Tips for Individuals with Low Income

Below are some tips to keep in mind before putting this piece of shiny plastic in your wallet:

Limit Your Use

If the income you earn is low, it is quite obvious that the credit limit on your credit card will also be low. In such a scenario, it becomes difficult for one to limit expenses or resist the urge to overspend. Ideally, the credit utilization on your credit card should not surpass 30% of your credit limit.

In most cases, people end up hampering their credit score when they use the credit limit beyond the benchmark set. This shows that you are too dependent on credit.

If you are one of those people who tend to use their credit cards aggressively, you should take your credit card payments seriously. You should try and make small expenses on your credit card in UAE and repay the outstanding dues on your card before the due date.  You should also consider using your credit card only in case of emergencies, especially if you earn a low income.

Credit Card Due Dates are Important!

Most of us know how credit cards work. The due date on the statement of your card is important, and you must clear your dues by this date.

As a credit card user, you should always remember one key rule – do not spend more than what you can afford to pay! This is the area where most card users get in trouble. The credit card provider gives you an option to pay a minimum amount out of the outstanding debt on your due date. However, once you fall prey to paying less than your dues, you will see your debts getting accumulated quickly and thereby leading you into a debt trap.

It is essential to have healthy credit habits and financial discipline in order to make sure that you pay your balance in full.

Avoid Impulsive Buying

A popular habit amongst youngsters is impulsive buying. However, if you are someone who is earning a low income, then you should avoid indulging in any such habit. The main reason being that paying out the outstanding dues will not put you in a good situation.

It is important for a young individual with a low income to remember that any such shopping sprees and impulsive purchases will end up leaving them with a huge debt.

If you find yourself indulging in any such impulsive buying on your credit card in UAE you are likely to end up in a debt sooner or later. Therefore, you should rethink your financial decisions.

Not a Wise Idea to Use Your Credit Card to Earn Rewards

One of the major attractions of holding a credit card is the rewards you earn on your spending. There is a wide range of credit card in UAE that offer you cash backs, discounts and reward points that make shopping attractive and feasible. However, this should not be one of the major reasons for holding a credit card in UAE.

There is a big misconception amongst many of the youngsters out there, that spending recklessly on the credit card in UAE will help them in major earnings. This concept is applicable for cards with a higher credit limit. But if you earn a low income, the limit on your card is lower and hence it is vital to hold use your credit card in a careful manner.  The providers also have terms on the usage of these reward points.

Therefore, it is not a wise decision to spend on your credit card only to earn rewards.

The Matter of Interest

Last but definitely not least is one of the fundamental things about owning a credit card in UAE – how much interest are you paying on the card?

As compared to a gold or platinum credit card, a card with a lower limit has a higher interest charge. It is not a wise decision to accept any interest rate that is offered to you on your card. You should make sure that you understand and evaluate the finance charges before opting for any credit card in UAE. You should explore the options offered by other banks before locking down one particular provider.

The Bottom Line

It is important to remember these key steps before making any purchases on your credit card. Always remember – healthy financial habits go a long way. It is a good idea to keep your purchases in control when you do not have a paycheck that pays you a large amount.