Banking Basics
We won't deny that credit cards, like any financial tool, are a double-edged sword. They're like hammers you can use to build or destroy a home. And while they may save you from financial hardships, credit cards can also pose a problem if you use them irresponsibly.
Buy now, pay later. This is the slogan of all credit cards and why they're popular among many. And this popularity isn't for nothing. Credit cards can help you meet your needs. But misusing one may lead you to fall into a debt trap.
Not sure how to use a credit card wisely? This is where we come in!
Here are some tips to keep credit card debt from keeping you up at night:
Pay off your credit card balance in full each month
The most important tip we can give you is to pay your credit card balance on time or before the due date to avoid being subject to interest and late fees. If you become used to doing this, you won't have to worry about an outstanding balance next month. And trust us, you should acquire this habit because, over time, unpaid balances can turn into hefty amounts that may lead you into a debt trap.
What would happen if you miss a credit card payment? You'd be subject to a fee, and your credit history would be negatively affected. Wondering why having good credit history matters? It would help you get loans more easily and help your overall relationship with the bank.
If you can't pay off your credit card's outstanding balance in full, pay as much as possible to reduce the amount that will be subject to interest. In addition, make sure you pay the minimum amount required.
Spend within your means
Having a credit card doesn't give you the green light to spend left, right and centre. Instead, consider your credit card a tool that can turn big purchases into small instalments and one that you shouldn't use to buy what you can't afford.
Sometimes, a person's credit card may have a higher spending limit than their monthly salary. So, keeping track of your monthly spending and sticking to a limit you can pay off is essential. It's usually recommended to use below 30% of the credit card limit and only get what you can afford to buy twice.
If you tend to overspend, keep your credit card at home before you go out shopping. Instead, only use your credit card to make planned purchases.
Avoid withdrawing cash
Sometimes, you may be forced to withdraw cash from an ATM using your credit card. It's important to know that the amount you withdraw is subject to fees when you do this. And that the fee will be greater than it would be on a purchase, so it's best to limit your credit card use at ATMs.
Avoid getting too many credit cards
Many types of credit cards are available, and we'll admit some have enticing benefits. But using too many credit cards all at once increases the likelihood of debt. Not to mention, tracking your spending and payment due dates will be more difficult. So, try to reduce the number of credit cards you use as much as possible.
Learn when to stop using your credit card
If you cannot pay off your outstanding balances, it's better to stop using your credit card altogether. We know it can be easier to ignore your debts, but the longer you do, the more debts you'll accumulate and the more difficult it will be to pay them off.
Understand your credit card's terms and conditions
We know they're long, but we will always urge you to carefully read the terms and conditions of your credit card and any other financial product. Knowing what fees are involved, your payment due dates, and your interest rate is necessary.
Ready to apply? Bank al Etihad offers many credit cards you can choose from. Learn more about them and apply today.
