A Guide To Better Credit Card Usage

A Guide To Better Credit Card Usage

by Ethan More

Credit cards are a universally recognized payment system. They are perhaps the second most accepted method of payment behind paying through paper money. The main difference between paying through cash and paying through credit is that, in the latter, the money you use to pay isn’t actually yours to begin with. In this article, we are going to talk all about using credit cards. Here, we will include a discussion on the basics of how it works, the strategies you can employ to get better at using it, and the things that you have to be cautious of. 

By the end of this guide, if you think that credit cards are a fantastic payment system that can work for your situation, head on to our list for the best credit card signup bonus so that you can get a little bit of cash when you first sign up for a credit card.

How do credit card payments work?

The term “credit” refers to the process of borrowing money from a bank or financial institution and letting them pay upfront for the entire cost of the goods or services. This is so that you won’t have to dish out cash when you choose to buy a certain good or avail of a certain service. This is very beneficial if you are in a pinch or if you strategically choose to withhold the use of actual cash that you own for more important expenses. In such a setup, you are required to pay the bank in return either by paying the debt in full, or you may also arrange to pay in installments. If you choose the latter, you will have to pay interest. In other words, if you choose to pay via installment basis, you will generally be paying a lot more than the price of the good or service that you have initially borrowed.

How can you use credit cards better?

  • Use them strategically

Some expenses are better off being paid through cash. This is applicable to relatively small expenses, such as grocery, shopping, or some other day-to-day transaction. On bigger purchases, however, it might be strategic to use credit cards instead. This is tied back to the principle that cash is king. Cash is the most important resource that you have, and it gives you a much wider range of options for payments. And so, you generally want to prioritize keeping cash with you. 

Credit cards are also excellent for paying for long-term items. Long-term items refer to those that you expect to have or benefit from over the course of more than one year. This includes laptops, home appliances, computers, etc. Paying for these items through credit is considered strategic because you spread out the payments over the item’s lifespan, so you aren’t forced to lose a considerable amount of cash upfront.

  • Pay on time to build your credit score.

One fundamental concept in credit payments is credit score. Essentially, it’s a measure of how reliable you are as a borrower. From the perspective of the vendor and the lenders, a higher credit score or credit rating means that you are more likely to pay. In return, they are more likely to allow you to buy a certain good or avail of a certain service from them. Credit scores or credit ratings can be raised by paying on time and by using your credit cards actively. If you are late on your payments, your credit score will take a hit, and you are more likely to have your credit card decline.

  • Only spend what you have.

As we mentioned earlier, you are using the money from the bank for paying for the good or service upfront. However, that does not necessarily mean that you won’t be paying the bank for the money that you owe. Keeping this in mind, it is best that you think of credit as the money that you have in the bank. If you are not confident that you can save up the money within the payment period or if you straight up don’t have as much money in the bank, then it would be wise to hold off on using that credit card.

  • Credit card subscriptions

This last item on our list is a much-needed warning for all credit card users. Today, there are tons of credit card subscription services available, especially on online platforms. This could be for video streaming, music streaming, storage services, internet protection, etc. The reason why we have pointed this out is that a lot of these services will automatically charge you without notice. As such, you need to pay close attention to the services that you subscribe to. 

Only use your credit cards when you absolutely need that particular service. Also, if you don’t anymore need that particular service, be sure that you cancel your subscription and that you clear your credit card information from the company’s website. This is to make sure that you won’t incur any unnecessary subscription fees in the future.

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