As people in business quoted, credit cards are among the most powerful financial instruments in the market. They bring leverages for users to exploit and use on amassing wealth. Through the smart use of credit cards, cardholders can optimize their usage despite their debts. Here are five ways to smartly use credit cards other than accruing debts.
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Settle the Dues in Full and on Time
Many financial advisors and personal finance coaches would recommend building a healthy relationship and habit with the credit card. In practice, finance advisors meant settling the credit balance in full and on time right before the billing date. Why is that?
Ultimately, it all boils down to how the zero-interest policy of credit cards works. As the policy name implies, credit card owners will not pay interests per purchase on a fixed set of periods. Users, however, do need to make the minimum payment every month to avoid lapsing the grace period.
Credit Card Rebates and Travel Insurance
The usage of a credit card can be more inviting than its debit card counterpart, more so than paying cash upfront. By not reading the fine print in between, most people will not understand how powerful credit systems can be to personal finance.
Credit Cards often incentivize their owners to spend and pay more using their credit system, and they do it in many ways. The most common incentive is through the rebate system, wherein the user receives a percentage of his cash payments back on certain spend items. On top of that are travel insurances wherein the credit card company fully compensates or reimburses traveling anomalies that a cardholder may face.
Purchase Insurance
Credit card payment can be rather important threshold security is utterly important transactions. As digital payments become prominent in most transactions, credit cards can safeguard their owners against mishaps throughout the trade.
Some banking companies offer cardholders who use their credit card to purchase goods protection. This means a cardholder may be eligible for a reimbursement or a replacement if there are damages to the product. The same policy applies to stolen goods, scams, and even fraudulent online transactions. Credit card users, however, would need to disclose the information and file their claims within the 90 to 120-day period.
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Building Credit Score
A good credit score can differ between expensive loan interests and cheap ones. Thus managing credit scores is one of the smartest moves that can help cardholders incrementally save money.
The key is neither maximizing nor minimizing the spending limit on the card as the bank may deem the holder as a risky debtor or penniless one.
Paying on time gives the bank the impression of a responsible payor, which increases credit score. But in the worst-case scenario where the holder is insolvent before their billing period, they can opt for a payday loan. Payday loans are the easiest to acquire as a cardholder but have a high-interest rate. Cardholders should treat these specific loans as an emergency and last resort.
Cash Advance from Credit Card
Cash Advances are credit card holders’ edge over non-holders, with some credit card companies and banks offering it on premium cards only. Advances work through withdrawing cash from the credit card and charging the amount on the credit card. However, there shall be a limit on how much a user can withdraw on their credit card.