It is easy to get misled while using your credit card for making extravagant purchases that are not really needed. While having a credit card gives you immense peace of mind it also often leads you into a psychological space that allows you to make mindless transactions. Add to that the facility of making only a minimum payment towards your dues, and most people end up being crippled by a major credit card debt that is both overwhelming and highly unaffordable. Here are a few simple yet effective financial tips that will help you manage your credit cards more efficiently and prevent you from falling into the pit of an unreasonably high debt.
Fix a budget
Planning a budget and sticking to it throughout your credit card cycle will help in managing your finances efficiently and ensuring that you do not make any expenditure that is not really required. Create a log of your earnings and expenses towards essential purchases including medical bills, energy bills, grocery, gas and so on. Monitor the budget at the end of the month and see if you are spending more than your income.
Spend only as much as you can afford
While it might be tempting to buy that flashy home theater system when you are aware of your extensive credit limit, it is always a good idea to refrain from impulse buying things you cannot really afford to spend a bomb for. Also, try to limit the use of your credit card to emergencies only, and put your cash and debit card to use whenever necessary.
Keep an eye on the due date
Always keep a track of your credit card balances and make the payments before the due date. If you miss one payment, you will not only have to pay a higher amount in the next billing cycle but also will be charged a hefty interest that can accumulate into a massive lump sum after awhile. When you get into the habit of making late payments, you eventually get trapped into a vicious cycle that his hard to keep up with.
Pay off your outstanding in full
Although most credit card companies provide you the facility of making a minimum threshold payment towards your credit card balances, you must make it a point to always pay your balances in full. In this way, you will not be carrying any leftover outstanding into the next billing cycle thus eliminating the risk of a credit card debt. Also, following the habit of paying your balances in full will ensure that you never spend more than you can afford to repay at the end of the month.
Say no to cash advances
You must never withdraw cash on money that is not yours. Cash advances are often touted as one of the easiest ways of accumulating a massive debt on your credit card. Withdrawing cash from your credit card is a sure shot indicator that you are treading on the path towards a crippling debt. An effective way of ensuring that you never have to make cash advances on your credit card is creating an emergency fund for the sake of unforeseen financial contingencies.
Use your credit card smartly and treat it as an opportunity to strengthen your finances and not a license to make indiscriminate expenditures.