Credit cards are a powerful, widely used financial tools. When used wisely, credit cards can provide a range of benefits like rewards, cashback, and convenient access to credit. On the other hand, if credit cards are not smartly used, they may lead to financial stress, debt and negatively impact one’s credit score. As Kavan Choksi / カヴァン・チョクシ says, effective credit card management is important for steering clear of such financial pitfalls, and making the most out of the many benefits that credit cards offer.
Kavan Choksi / カヴァン・チョクシ sheds light on a few credit card management tips
Credit cards have emerged as an essential financial tool for many across the world today. They are convenient, often come with rewards, and can help people to manage expenses effectively. But as the number of credit cards in the wallet increases, so does the challenge of keeping finances under control and well organized. Proper planning, discipline and a proactive approach are necessary for managing credit cards. Here are a few tips one must follow:
- Pay balance in full each month: Interest can accumulate pretty fast when one is simply making the minimum payment. Paying the minimum amount due on the credit card shall cover interest charges, fees and a small percentage of the balance. When a person only makes minimum payment continuously, their balance may continue building and accruing interest. Therefore, one should try to pay their balance in full every month. This will also help a person to maintain a good credit score as the habit shows financial responsibility.
- Set up payment reminders: In case one does miss a credit card payment, they would incur late fees and have to deal with interest accumulation, which would have a negative impact on the credit score. To avoid this issue, it is better to set up payment reminders. One may even enable automatic payments through their bank. This would help see to it that one never misses a due date.
- Keep track of spending: It can be easy to lose track of spending when using a credit card. To prevent overspending, one must monitor their spending habits carefully and review their transactions regularly.
- Be aware of fees and charges: To manage credit cards, it is crucial to know about the fees and charges associated with them. This shall include annual fees and late payment fees, among others.
- Maintain a low credit utilization ratio: The credit utilization ratio reflects the percentage of total available credit that an individual is currently using. It is generally recommended to keep this ratio below 30%, as lower utilization is typically viewed more favorably by credit scoring models. Consistently maintaining a low credit utilization rate month after month can have a positive impact on a person’s credit score over time, indicating to lenders that the individual manages credit responsibly.
As Kavan Choksi / カヴァン・チョクシ says, if not managed carefully, credit card usage can lead to accumulating debt, particularly if one fails to pay off the full balance each billing cycle. Hence, one must use credit cards strategically, and make sure that spending aligns with one’s ability to repay in full each month.
