Improve Your Personal Finance By Using Credit Card

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1 year ago

Debit Card is a card tied to your bank account. When you use a debit card, you use the money in your bank account. A credit card is a card that is not tied to your account. When you use your credit card, you use your bank’s money. Your card comes with a certain limit and you spend under that limit

Generally speaking, people believe that a debit card is better than a credit card, therefore, a lot of people avoid using Credit Card because they believe when you use a debit card, you use your own money and you will spend it wisely. However, a credit card will increase your spending.

Is that the case?

Debit Card Vs Credit Card: Which Is Better?

When you are using a credit card, you are using a bank’s money and you tend to temporarily believe that it is free money; therefore you cannot control your spending. When you use a credit card you are basically spending money on things that you may not actually need it. However, my notion completely changed when I read Frank Abagnale, while he is not the best person to get advice from (due to his criminal record), his thoughts on debit card and credit card is very true.

The difference between a debit card and a credit card is the difference between using your money vs using their money. Why should you use your own money when you can use their money for absolutely no cost? Why should you spend your money when you can use it in the money market, stock market, and other investment areas? By using a credit card, you will also improve your credit score, which can help you in many ways.

Three Reasons Why Credit Cards Are Great

A lot of people think that using a credit card is not good for your personal finance because credit cards will increase your spending and unnecessary expenses. However, credit cards are awesome products, and here are 3 good reasons for using credit cards to manage your personal finance.

If you use a credit card and if you are paying the full bill amount timely, your credit score will improve. This will make you eligible for a loan.

You get a free interest period. When you make a purchase through a credit you get a free 30-45 days payment window.

You get reward points for using credit cards. You can convert those reward points to gift vouchers, hotel points, airline points, etc.

Generally speaking, if you are using credit cards responsibly, you can manage your personal finance smartly. Using credit cards responsibly means using credit cards just like you use cash to spend on items that you actually need and spend only on essentials.

How to Manage Your Money With Credit Cards

Credit Cards are a very good product if you know how to use them properly. So, what does it mean to use a credit card properly?

Buy only the products that you need, and never buy any products that are not essential.

Pay the credit card bills in full amount even if you get an opportunity to pay only the minimum due.

Don’t spend more than 80 percent of your credit limit.

If you follow these three tips while using credit cards, you will be able to manage your money in a number of ways.

When you are using credit cards only to buy essentials, you can easily control your spending. If you are paying the full bill amount, your credit score will improve and you be entitled to loans.

With credit cards, you get a free interest period, which can be 30- 45 days on average. You can use the bank’s money for free until then. When you are using bank money to pay your bills, you can use your money to make investments.

Credit Cards will also allow you to collect points, you can use these points to get rewards and even cash backs.

If you use credit cards properly, you can have a lot of benefits in terms of money management and improving personal finance.

Things to Remember While Getting a Credit Card

The first and foremost thing to consider while getting a credit card is the limit. Some banks and credit card companies tend to give higher limits for the same income stream, compared to others. For example, if your monthly income is $5K, some companies give you just a $1k limit whereas some companies can give you as high as a $3k limit. Choose the higher limit if that is your requirement. The second important point is the payment term, whether you have to pay full or minimum due. Choose the card that allows paying the minimum due, however, always make sure to pay in full.

Things to Remember While Using a Credit Card

One of the common mistakes people make with credit cards reach their spending limit. If your card has a limit of $1000, you should never spend more than $800 because when you spend more than 80 percent of your credit limit, your credit score will go down and you might not get any benefits in the future. Another major problem is paying the minimum due. Even though many credit card companies allow you to pay 10 percent of your total bill amount, you should always pay the bill in full, if you pay the minimum due, your credit score will reduce.

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Comments

Hay que saber usar las tarjetas de crédito, como dice es arma de doble filo, hay que gastar lo necesario e ir pagando interese más capital y saberla administrar

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1 year ago

I've learned alot from you just keep sharing thoughtful content

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1 year ago