How to use a credit card and not get into debt

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

These tips will not only help you not go into the red, but also benefit from your credit card.

1. Carefully read the contract when registering

This is the most important advice in a situation where you have to sign any papers. Everyone has heard it a million times, but for some reason many still hope for a miracle and put an autograph on documents without looking.

Therefore, it is worth repeating once again: read the contract carefully. Pay particular attention to grace periods, restrictions and credit card bonuses.

Grace period

This is a grace period when interest for using money from a credit card is not charged. Depending on the bank and type of card, the grace period can range from several days to several months. And you must remember these terms well.

Credit card restrictions

Some transactions may be subject to interest or commission. These most often include withdrawing cash from ATMs and transferring money from one account to another.

Credit card bonuses

It happens that banks offer nice things for the active use of borrowed funds. These can be miles, cashback or discounts from partners.

However, bonuses should be treated with caution. If you have a black belt in personal finance management, you can get profit and not get into a hole in debt. The rest is better not to get carried away.

2. Pay off debt before the end of the grace period

You have read the agreement carefully and remember the grace period end date better than your own phone number. There is little to do: return the money by credit card before the expiration of the grace period. If you do not do this, the bank will fine you for late payments and will begin to charge interest on the borrowed funds.

As a rule, credit card rates are rather high: on average, from 20%. Therefore, the debt will grow quickly enough. If you miss the moment, then in the near future you will spend all available funds to pay interest and will not be able to repay the loan itself.

Your global goal is to always pay off debt on time and not overpay.

3. Do not pay for everyday things with a credit card

If you do not have enough money for food, rent and clothing, do not rush to get a credit card. The card is just an illusion that you have more funds. In fact, it only allows you to transfer part of your earnings from the next month to the current one. Accordingly, your future income is automatically reduced by the amount borrowed, which will have to be returned.

When you don't have enough money for everyday things, it's worth working on managing your finances or trying to make more money. Debt, in your case, is a quick and easy way to make the situation worse.

4. Use a credit card for insurance

The best way not to go broke on a credit card is to not use it. However, you can have it in case of force majeure. For example, a credit card will come in handy if your refrigerator or stove breaks, which you simply cannot do without. Or expensive medicines will be needed.

Keep your card for the necessary and important purchases, but do not get carried away. Use it as a lifeline: it should be thrown to a drowning man. But if a person constantly goes into the water only with him, he will never learn to swim.

5. Use a credit card to save money

Some of the offers of shops, airlines, travel agencies are amazing in their generosity. But to get a huge discount, you have to pay now. In this case, a credit card will come to the rescue.

For example, you find that the bike of your dreams, which usually costs 45 thousand rubles, only sells for 25 thousand today. You have money for it, but it is on the deposit. And you don't want to lose interest due to early withdrawals. At the same time, you can accumulate the required amount without damage in 1-2 months. But the action is only today.

As a result, the most profitable option is to pay for the bike with a credit card and return the debt to the bank during the grace period. So you save 20 thousand rubles and get the transport of your dreams.

6. Do not withdraw cash from ATMs

Usually, banks are not interested in you withdrawing cash from your card. A financial institution makes money from transactions when you pay with your credit card.

Accordingly, if you withdraw cash, the bank will already earn on you and take a commission. In addition, a visit to an ATM may result in a reduction in the grace period or an increase in interest. Look for all additional conditions in the contract.

In order not to pay too much, pay immediately with a credit card or look for a bank that does not limit cash withdrawals.

7. Pay off debt in amounts larger than the minimum payment

There is a minimum payment for each credit card that must be paid in order to continue using the card. This is usually a fairly small amount, very slowly leading you towards paying off the debt. And the longer you pay back the loan, the more interest you spend.

Give the bank the maximum amount you can afford to pay off your debt faster. Save time and money.

8. Do not pay with a credit card for things that are inaccessible to you

Introduce the rule to pay with a credit card only for those things that you would have bought from your salary anyway. Moreover, it is advisable that in the event of an emergency, you can quickly pay off the debt from your savings.

If you get 25 thousand a month and have saved 30 thousand more, buying a smartphone for 100 thousand is a bad idea. First, you will most likely miss the grace period. Even if the bank is loyal and offers you to use the money without overpayments, for example, 100 days, during this time you will receive only three salaries. Together with savings, this will amount to 105 thousand, and you still need to eat for something.

Secondly, if you get fired, you will definitely not be able to pay off the bank. And the constant increase in interest payments will make the situation completely desperate.

9. Use bonuses correctly

In some cases, a credit card doesn't drive you into debt, but helps you save money. We are talking about a variety of bonuses: discounts, miles, cashbacks.

The main secret of this approach to credit is spending money that you already have on your debit card or wallet.

For example, you were transferred a salary of 40 thousand rubles to a debit card. There are no bonuses for it, but with a credit card you can earn miles for every purchase. Accordingly, you pay with a credit card wherever money is demanded from you, but does not exceed the amount of 40 thousand rubles. After a month, you simply transfer this money from a debit card to a credit card, fully repaying the debt, and rejoice in the accumulated miles.

10. Remember this is not your money

The bank is not at all a fairy godmother who decides to shower you with money. This is a commercial institution that is trying to make money from you. Remember this whenever you take your credit card out of your pocket. It is now you are spending other people's funds, and you will have to give your own.

Financial inconsistency can lead to the fact that the "fairy godmother" first charges you huge interest, and then sells the debt to evil collectors.

Another negative consequence of misuse of the card is bad credit history. Do not think that only information about "real" loans is included in the database. Even a small debt that is not repaid on time can stand between you and the mortgage.