Understanding how to use a credit card is not something that is taboo. Especially considering that the function of a credit card can actually smooth your financial or business circulation if done wisely.
The initial concept of the credit card itself is actually to provide the money needed by the borrower to achieve a financial goal.
It's just that it can't be denied, lately the use of credit cards has been more directed for consumptive purposes which makes a person entangled in devices and constantly in debt.
In fact, a credit card can actually be a financial savior. Just imagine, when you have lots of debit cards, but there are not enough contents, the needs you need are not fulfilled.
But when you have a credit card, you can get a short-term loan in a very short time without a complicated process.
Who would have thought that knowing how to use a credit card could increase your credit score. That way, you can more easily get a loan in the future with a ceiling that suits your needs.
Of course this can happen if you use your credit card wisely.
Get to Know What a Credit Card and Credit Score Are
Maybe you are a little less familiar with the term credit score. This is a calculation to describe the ability and eligibility of a borrower to repay debt.
Every bank or other financial institution often checks credit scores in advance to determine credit limits that can be submitted and approved.
Making payments with a credit card is actually also part of a short-term loan that makes you get a credit score.
This score will be useful in increasing credit limits for other loans in the future, such as for loans without collateral or for home ownership loans.
But be careful, your credit score can get really bad if you use a credit card without consideration.
Here's a wise way to use a credit card so that your credit score as a debtor remains safe and doesn't hinder other urgent loans in the future.
Set Credit Card Use Limits
It doesn't mean that because you have a credit card you are free to use it to buy all the things you want. However, using a credit card is synonymous with debt and you still have to pay for it all.
For that, start making limits on the use of credit cards. Get to know your financial capabilities first and set a nominal that can be tolerated by using the credit card.
Do not let you go too far using a credit card to the point where you become confused because there are no funds to pay for it when the bill is due.
Paying Bills on Time
The wise way to use a credit card is to always pay bills on time. Just like other types of credit, there are shadows of fines and interest that can happen to you if you don't pay your monthly bills on time.
When you are late paying credit card bills, the credit score that the Financial Services Authority has on your behalf will also deteriorate. You will be labeled as having a history of substandard payments and this could affect loan approvals at other financial institutions in the future.
Always Pay Off Bills
Another proper way to use a credit card is to always make payments in full when the bill arrives. It is not uncommon for cases where credit card borrowers only pay a minimum bill of 10 percent of the total bill each month.
When you are only able to pay 10 percent of the total bill, it means you are letting the interest on your debt get bigger.
The habit of paying minimum bills will also make you tend to make loans with a nominal value above your financial ability. The concept of “dig a hole, close a hole” is also very vulnerable to people who are used to making this minimum payment.
Avoid Cash Withdrawals
One of the features that you avoid when using a credit card is cash withdrawals. This feature allows you to take a certain amount of cash, thus making it easier for you to make various purchase transactions.
However, the cash withdrawal feature actually offers higher interest, which you have to pay every bill due date. Obviously this is not a wise way to use your credit card, it will burden you more and risk making you more anxious to get cash from debt.
Don't Have Many Credit Cards
Don't be proud when you have many credit cards. This is tantamount to indicating a more consumptive life risk and greater obligation to pay bills each month. If you want to be wise and maintain your credit score, it's better if you only rely on a maximum of two credit cards for various purposes.