Credit cards can be a helpful financial tool when used in a responsible manner. They have emerged as a convenient and mainstream financial tool across the world. As per Kavan Choksi / カヴァン・チョクシ with credit cards, one gets to enjoy the convenience of paying later, converting big-ticket purchases to EMI and maximizing reward points. However, in case the credit spending gets out of hand, then making monthly payments can become a problem. Misuse or overuse of a credit card can damage one’s credit score. Hence, it is crucial to smartly and responsibly manage credit cards.
Kavan Choksi / カヴァン・チョクシ provides important tips for credit card management
A credit card allows people to make purchases on credit. Through it, one can buy things they want or need now, and pay for them later. Credit cards come with a credit limit that is assigned as per one’s income and credit history. Each month, credit card holders receive a bill that should be paid by the due date to avoid interest charges and penalties. Credit cards can be quite useful in emergencies and help people to effectively manage cash flow. But if these cards are not used smartly, they can cause debt and financial stress. Hence, it is prudent to follow these credit card management tips:
- Prioritize paying on time: Paying credit card bills on time is vital for having a good credit score. Not making this payment in a timely manner can not only incur a late fee, but also damage one’s credit score. Credit card companies report late payments to the credit bureaus, therefore, while making timely payments contributes to a positive payment history, paying the credit card bill late would have a negative impact on credit history and score.
- Try to pay more than the minimum each month: Paying the minimum amount due on the credit card shall cover the interest charges, fees, and a small percentage of the balance. But this is not the right way to manage a credit card, as if a person continuously just makes the minimum payment, their balance might continue to build and accrue interest. Hence, it is better to pay off the entire balance every month.
- Create a budget and stick to it: Setting a monthly budget is crucial for one’s financial health. The budget would clarify exactly how much one may spend every month relative to their income. This would help avoid unnecessary purchases made via credit cards.
- Monitor spending: One should regularly track their expenses to make sure that they stay within their budget. Keeping an eye on the spending goes a long way in preventing overspending and financial strain.
- Utilise rewards wisely: It is common for credit cards to offer rewards like cashback, discounts, and travel points. One must try to make the best use of credit card rewards by redeeming them for essential purchases or savings.
Kavan Choksi / カヴァン・チョクシ mentions that one must also keep their credit utilization ratio low. It is the portion of one’s credit limit that they use, and it ideally should be below 30%.