Credit cards have become popular for several reasons, but they need to be used wisely if you wish to reap the benefits associated with them. You should not go overboard in your expenses just because you don’t have to pay for them immediately. What needs to be remembered is that the available credit is only for the short-term and has to be repaid at the end of your credit card’s billing cycle.
A disciplined approach to using your credit card is important for building a good credit history and a credit score. It will also help you avoid falling into a debt trap.
Here we talk about some instances where you should avoid using your credit card, especially if you wish to avoid the associated interest cost.
When Your Outstanding Balance is Quite High–
Excessive use of credit cards can lead you into a debt trap. You can avoid such a scenario by not using it when the outstanding balances against it are already high. If you are regular in paying off your credit card bills in full before the due date, you should go ahead and use the card for purchases.
However, if you have a revolving balance on your account, the interest cost on the outstanding amount may at some point negate the rewards associated with the usage of the card. The best strategy is to not use or limit the use of your card for some time, at least till the time you make all the payments due on your credit card.
When You Are Not Aware of the Credit Available to You–
You should not use your credit card if you are not sure about the available credit limit. Using your card beyond the sanctioned limit will not only hurt your credit score but also attract additional charges. It is advisable to use 30% or less of your available credit.
When You Are Shopping at a New Place and Have Some Suspicion–
Do not use your credit card in a store or a place that is unfamiliar to you or you are not comfortable with. You should never give your card for swiping to people who appear suspicious. Similarly, never use your credit card when using a public WI-FI or a shared network.
All this can help you prevent fraud or misuse of your card. It is better to be cautious rather than regret later.
When You Are Excited–
Shopping when you are excited can prove to be quite costly. You may go overboard in your emotions and spend beyond your limits to buy things that you may not need. The reality is visible when your credit card statement for that month comes or when you have to make the payment for your credit card bill. You can avoid such situations by waiting for yourself to become normal and then take a decision.
Credit cards can help you build a good credit score besides helping you manage your expenses well. But they need to be used prudently so that the advantages do not turn into disadvantages.