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Today credit cards offer a high level of flexibility and security, which is why many people use them in their daily purchases, as well as for service payments. However, to maximize the benefits of credit cards, we must make sure that we use them sensibly and responsibly.
Credit cards are practical, but you must be careful with your expenses, as they may end up affecting your financial stability. This article will help you understand how you can use your credit card to work on your behalf and not against you.
What is a credit card and how does it work?
A credit card is more than a rectangular-shaped plastic. It is a flexible payment tool accepted by the largest number of commercial establishments around the world. It allows you to pay bills and make purchases online or on the phone with great ease.
Stores and restaurants that accept credit cards usually have decals at the entrance or signs in other places to indicate which cards are accepted.
The balance of the card must be paid each month to avoid the collection of interest on purchases made, so essentially short-term credit is granted without the consumer paying interest.
Types of credit cards
Believe it or not as they say out there you know that there are several types of credit cards that are issued depending on the use that will be given, among them we have free, classic, Platinium, prepaid, Black, virtual, Gold card. The best known brands of credit cards are those issued by Visa, MasterCard, American Express, dinners Club
Credit Card Benefits
No doubt credit cards are part of the basic financial elements of modern society and with them come the advantages of using them properly, this is the list of some of their benefits.
- Access to unsecured credit (no warranty is required on amounts charged)
- It offers the uninteresting use of funds as long as you pay the balance in full and on time.
- Instant payment of purchases, allowing instant reception of goods and services
- Access 24/7
- It can help you establish a good credit history.
- Fraud protection
- They allow anyone who qualifies to buy things that they may not be able to buy in cash and then pay them in smaller payments.
- They are the most used means to make purchases and pay debts.
- Credit cards are accepted in many shops in different parts of the world.
- You can lend a small amount of money for a short period of time.
- Facilitate payment of service bills quickly
- You can easily check your balance, which is an added bonus. Because if you’ve spent a little more than you have to, you can stop your expenses.
- You can distribute your payments because you can have a lower interest rate.
- Provides a convenient payment method for purchases made over the Internet and over the phone.
- It provides incentives, such as reward points, that you can redeem.
- It is more convenient to carry than cash.
A credit card can be an advantage to your way of life, but if you are not handled with care you can become a financial debt you will not be able to pay, especially if you use it without control of your expenses.
Credit card Disadvantages
If credit cards are abused, it can result in high levels of debt, which can create huge financial problems for the future. Therefore, it is worthwhile to know the drawbacks of using credit cards to reduce the risk of falling into unmanageable levels of debt:
- The biggest disadvantage is that it is very easy to make a debt.
- Your credit cards are often the reason for identity theft.
- Excessive use can leave you with a debt that is very difficult to pay.
- It is harder to cancel the debt if you do not pay on time than other forms of credit, such as a personal loan.
- Damages your credit rating if your payments are delayed
- Allows you to accumulate more debts than you can handle
- They have complicated terms and conditions.
- Your creditor always reserves the right to take legal action to collect your overdue debt, even if you are disabled.
- The issuer of the card can use the embargo of your bank account to pay off the amount of the debt
- If you only make the minimum monthly payment, you may never leave the debt.
Always try to pay the full balance of your credit card before the end of the month, as this will prevent you from paying interest on your account balance and will also help you avoid being charged more interest for late payments.
Credit card Use Precautions
A good way to help you reduce what you pay with your credit card is to find a card with a low interest rate. Many financial institutions now offer at least one of these types of cards. This is the main way to not borrow more than you can afford.
- Use your credit card for low or no charge and save on the annual charge that some companies charge.
- Just charge your credit cards what you can pay in full when the bill arrives.
- You may not use your credit card as much if you start believing that you have to pay the entire balance at the end of each month.
- Remember that when you take a cash advance on your credit card, the interest begins to accumulate immediately and not on the expiration date of the payment.
- If you are unable to pay the full balance with your credit card, always try to pay more than the minimum amount requested. If you only pay the minimum, it would take years to liquidate a relatively small balance, and it could cost you a fortune in interest.
- Be sure to compare the credit cards to find the one that best suits your needs.
- If you already have credit card balances that charge high interest rates, it is worth considering the possibility of consolidating them.
- Resist the temptation to use your credit card for purchases that are not really necessary simply because you have it handy. Remember, you will have to pay whatever you spend on it, so if you can’t pay the purchase, don’t do it.
- Keep all your receipts so you can keep track of what you’ve spent. Credit cards are convenient for consumers.
The main advantage of having a credit card is convenience, but if you are not good at budgeting and managing your finances, we recommend you not to make one. Managing money and credit cards wisely is a talent that few of us are born with.
But it is a skill that can be learned easily. Just make sure you take the necessary precautions so that they cannot be used as tools against you.