When we use a credit card we are faced with a constant question: how to get the best out of it without ending up over-indebtedness. Some use them as if they are a toy and others see them as if they are selling their soul. But it is not about that, it is a matter of being aware and knowing how to handle it.
To begin with, it is very important that you bear in mind that your credit card is not an extension of your salary, it can serve as an advance that you can use to cover certain expenses at the moment, but you must bear in mind that you will always have to pay them later . Therefore, today I want to give you some tips to take advantage of the card in your favor.
1. Access your benefits
Credit cards offer you the option of accumulating points or miles, with which you can make specific purchases, such as plane tickets. Some companies even allow you the option of transforming those points into money. On the other hand, you can get discounts at certain businesses and access insurance for having your credit card contracted.
One recommendation that I give you is that you plan your purchases according to the benefits that the card offers you. For example, if you are planning your vacations, analyze if it is better for you to buy your flight with miles or in cash.
2. Make purchases without interest
Surely you have heard the phrase “to months without interest” in several places. Well, this means that you can make a purchase with your card and pay for it in parts each month, without being charged interest on this payment. However, if you spend compulsively, thinking that because you are paying without interest it is not so expensive, you end up adding debts that you will not have how to pay later.
Ideally, you should take advantage of the interest-free option when you need to make a large purchase, such as a computer or a new refrigerator. Seek that what you are paying in months has a useful life greater than the term of the debt.
3. Cover emergencies
We are always exposed to suffer an incident of damage to the home, car repairs, or medical emergencies that imply a cost that we did not have contemplated in our budget. In these cases, your credit card can serve as a backup to pay those immediate expenses.
4. Create your credit history
Your credit history contains all the credit operations you have carried out, information on the financial products that you have in your name and how responsible you have been with your payments. Having a credit card, and giving it a responsible management, helps you create your history or improve your score in the Credit Bureau.
Now, how to use your credit card responsibly?
1. Avoid the famous minimum payment
It can give you the feeling that you are paying little, but with the interest you can end up contributing more money and it takes you longer to pay off your debt. In fact, according to figures from the CNBV, 22% of credit card users in Mexico pay the total of their purchases each month, so 78% would be paying interest for expenses such as groceries, gasoline and others; simply due to ignorance about how credit cards work and the applicable rates.
2. Be clear when your card is cut
Always remember the cut-off date and the payment deadline to have control of your consumption and payments. Normally, there are 20 business days between the cutoff date and the payment due date. Ideally, you should pay your card as soon as you can. The most convenient thing is that the payment is just after the cut-off date so as not to forget this responsibility and negatively affect your credit history. There are even financial institutions that not only charge you the interest for the delay, but also ask you for an additional amount as a penalty.
In addition, I recommend that you constantly review your account statements to identify irregular movements and know how you are spending your money.
3. Become tricky
If you make your purchases in the days following the cut-off date and settle the total of your debt (balance so as not to generate interest) month after month, you can finance yourself for up to 50 days without paying interest.
4. Handle a maximum of two credit cards
There is no need to have more than two. For example, you can have one of services for daily expenses such as groceries, gasoline, the telephone and pay the total of your balance at the end of the month. And you can complement this with a credit one, where you have your plans for months without interest.
Remember that, the greater the number of plastics, the greater the probability that you will lose control of your purchases and end up accumulating a debt that you cannot pay.
5. Beware of compulsive shopping
Sometimes, promotions or seasons of offers in which they offer you purchases for months without interest can make us buy compulsively and spend more than we can afford. Remember that credit cards should not be understood as an extension of our salary.