When used efficiently, credit cards can be a powerful financial tool that can help with a variety of things. It can help you build your credit score, spread the cost of purchases and budget well.
Today, I’ve teamed up with cashasap.co.uk, experts in short term loans, to teach you how to use a credit card well. Read this guide for the best ways to use a credit card to help you manage borrowing and stay in control of your finances.
Best Ways To Use Your Credit Card
Build Credit History
Did you know that credit cards can be used to build you credit history? Having a credit card is a fantastic method of building your credit history as they are secure, flexible and can be used to make small payments. Credit history is important as it helps you to secure loans in the future, this includes purchasing a car on a finance plan, getting a better credit card, and even securing a mortgage.
Although not needing to borrow money is a good thing, it does mean that you won’t have any history for lenders to decide if you are a reliable borrower. Due to this it is important to build up your credit history in advance of needing it, so when the time comes the lenders will be able to approve you for borrowing and finance options.
If you want to use your credit card to improve your credit rating, it is best to use little and often. This means using small amounts of credit fairly often that you can pay off at the end of the month rather than using it for big purchases that you cannot afford to pay off yet. It is also worth noting that credit reference agencies recommend keeping below a certain percentage of your credit limit to have the best impact upon your credit rating.
If you are frequently coming too close to your credit limit, it can indicate that you rely on credit and therefore imply that you are not in a good financial position. This can negatively impact your credit score and therefore make you less likely to be accepted by lenders. You should also aim to pay back your credit in full each month to avoid any unnecessary interest. To make things easier you can even set up a direct debit payment that will automatically pay off the full amount every month. It takes time to build up credit history, so the sooner you start the better.
Credit cards are a fantastic way for you to spread the cost of larger purchases. Where you would usually have to pay for an expensive item in full, using your credit card gives you the opportunity to pay it off slowly without putting a strain on your bank account.
By using your credit card you can pay off the credit (plus interest) every month until you’ve paid for the purchase in full, meaning that you don’t have to make one large payment that will leave you with little to no money left.
It is important to only use this benefit of a credit card if you can budget for it. Be sure to include any credit card repayments that need to be made into your monthly budgeting plan, including the amount of interest you will have to pay.
Credit cards should only be used to make the most of your money. This means that you know you will be able to afford the repayments and be confident in the fact that using your credit card will not cause you further financial problems.
Purchasing with a credit card can help you to protect your purchases. If you buy something and it either doesn’t arrive or arrives damaged, or if a service you purchased on credit isn’t delivered, then your credit company is also responsible for getting the money back.
This means that if something goes wrong, you can inform your credit provider as they are responsible as the supplier for ensuring you get your money back.
Anything that costs between £10-30,000 bought on your card is covered by the law. Charging higher ticket items to your credit card and then paying it back once the item or service is delivered is a great way to use a credit card well. Just always remember not to spend above your credit limit!
There are several ways you can use a credit card well, which is why they can be extremely beneficial to have. It is really important to use your credit card wisely to ensure you don’t end up in any financial strain, though when used efficiently it can be a handy financial tool.