Proper Spending Habits When You Have A Credit Card

Credit cards offer users the convenience to pay for any unplanned expense all throughout the month even when pay day is still days away. This enables credit card holders to pay for medical and hospital bills should they become sick, or for school tuition fees, mortgages on house, utilities, house repairs, groceries, and other day-to-day expenses. But although having a credit card is good and provides us with a safety net, it can also be a problem if we can’t control our spending and use it excessive simply because we can.
Here are some important spending tips for credit card holders:

1.     Use cash as much as possible.

Sometimes, it is easy to just hand over our credit cards because its convenient and we don’t want to take the time to withdraw cash. But when you think about the rising interest charges you have to pay every month for your credit card, which take a big chunk off your funds later on, wouldn’t it be better if you just make that quick trip to withdraw at an ATM around the corner? Spending cash instead of swiping the plastic also helps us keep track of our expenses and money as we see just how much we have left after we make a transaction.

2.     Keep your spending to below 30% of your credit limit

How much you spend on your credit card will affect your credit score. So remember to keep your spending to a minimum, and aim to spend just below 30% of your credit card’s total limit.  A high credit score will allow you to apply for a higher limit—or other loans—in the future. People with a high credit card balance usually get a lower credit score.

3.    Always use just one credit card.

To be able to monitor your credit card monthly dues and expenses, it is handy to keep just one credit card and use it to pay for everything you need rather than paying with a different credit card every time you go out or shop. Also, when you have many credit cards, you also increase the risk of it all being stolen. So try to only use one credit card, and close away the account of the credit card you don’t always use.

4.    Always assess the affordability of a product before purchasing.

Having a credit card is about borrowing money you will return and not about having a limitless paying utility for all your whims and impulse buying. Keep this in mind before you take out your credit card and only pay for purchases and services which you think you can afford. If a certain product makes you cringe because of its higher than usual price, then you most likely cannot afford it, even with a credit card. Also, think hard first if the product you will purchase is something you need for the long-term or something that you just want for the short-term—a new phone, a great shirt. By buying only items you need, you cut down credit card spending, and ultimately, on interest rate charges every month.

5.     Sign up for auto payment.

It is easy to get carried away with credit card spending and forget about payments later on, giving us rising interest charge rates to worry over. If you often forget things, and you keep reminders around to tell you your daily schedule then it would probably best for you to sign up for auto payments for your credit card. When you sign up for auto payments, your money is automatically taken out from your account to pay for your credit card bills every month. You just have to make sure your account always has enough money each month for the auto-payments.

6.    Use a credit card with rewards

If you always pay with your credit card, then it is advisable to look for a credit card that offers rewards. Having a credit card with a rewards program can allow you to get back some of the money you have been spending in forms of cash back reward points, free gift items, upgrades in services, discounts, and other perks. Make sure to read the fine print first and that you understand the terms and conditions to know for sure if you will really benefit from the rewards program, or you just have to spend more for minimum returns.
Credit card spending can be managed when you have the discipline to limit yourself to a certain budget and to weigh out each transaction carefully. Follow all six tips you read through and you will see your credit score improve considerably.

The article is prepared by Money Hero. Money Hero is Hong Kong’s leading financial comparison platform. Compare a broad list of financial products side by side, and make better financial decisions.

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  1. There are many people out there doesn't use their credit card proper way. It's a bad habit no doubt.

  2. Thats exactly why we have published this article. Should be of some help.