When To Use Or Not Use A Credit Card
When compared to cash credit cards are convenient and also provide a long list of benefits which cash can’t. However, they also open up the possibility of falling into debt which can take a lifetime to resolve. Therefore you should have an idea about when to use or not to use a credit card.
Using a credit card is definitely convenient when you don’t have the cash at your disposal but are in a position to pay off the outstanding balances of the credit card on schedule. The moment you realize you may be rolling a balance over you should avoid using credit cards. You are exposing yourselves to charges which can take away your happiness while leaving you with a pile of debt. Let us look at when to use or not to use a credit card.
When not to use a credit card
Do not use your credit card if you are paying health insurance premiums or any other recurring bills with the sole intention to collect some reward points. The company offering the services regularly charge a fee which will deflate the value of any rewards you may be awarded. Even the IRS accepts tax payments by credit cards but charges a fee of 1.87% to 2.25% apart from the interest rate on the credit card. You should, therefore, keep the fees in mind before using your credit card for such payments.
When you are trying to make a payment related to a medical bill or any other expense you should in the first place negotiate with your creditor to offer a payment plan that will be beneficial for you rather than making the payment by using your credit card. You should not be trading one problem for another in the form of credit card outstanding balances.
You should not be using your credit card particularly when you are trying to obtain a mortgage because mortgage underwriters are not interested in looking at any changes to your creditworthiness from the time you apply for the loan until it has been repaid in full. Your credit score will take a beating and leave you unable to obtain the loan if your credit card utilization goes up suddenly.
You should be resisting the urge to use your credit card when you already carry a balance. You should not be attempting to get stuck in a cycle of debt but should rather be looking forward to paying off the balances and avoid any new charges on the credit card.
When you can use your credit card
Major purchases can be protected by your credit card especially when you want additional warranty or purchase protection. It is common among most credit card issuers to offer extended warranty for purchases bought with the card and you can, therefore, benefit from using the card.
You can use your credit card to earn reward points with the warning that you should be careful about your spending. Earning rewards points does not mean you have the freedom to use your credit card according to your desires. The reward points will only be useful if you are able to pay your outstanding balance by the end of the month. Any error on your part will leave you with a debt that you would rather not have.
You should be having your credit card with you when you are traveling because you will be vulnerable to fraud and theft’s in locations that are not familiar to you. Stolen cash can be considered as gone forever but a credit card can be blocked by a single phone call.
Credit card users are advised to use the facility at their disposal wisely without succumbing to the temptation of spending beyond their means. They should be using it as a method to get added value from their planned expenditure.
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