When And When Not To Use Your Credit Card
Category: Credit Card
Life has become simpler with the convenience of credit cards and the uncountable benefits it caters. But it often comes at a price of making considerable section of borrowers falling into debt trap which is turning their life difficult. So how can you identify the best times to plunk down the plastic? Here are a few guidelines.
When to say ‘Yes’ to credit cards
Gaining reward points
So many popular credit cards offer reward programs, it’s hard to think of a good reason to carry a credit card that doesn’t. Some offer cash back on every purchase, others pay points. Consumers who qualify can earn hundreds, even thousands of rupees back each year on everyday household spending.
Owning warranty and purchase protection
A credit card can be a great way to protect a major purchase. Most card issuers offer purchase protection and an extended warranty for items bought with the card.
Security purpose while travelling
People who travel can be more vulnerable to fraud simply by virtue of the unfamiliarity of the local language or surroundings. Lost or stolen cash is gone forever, but a credit card can be shut down and replaced during one phone call.
Reaping benefits exclusive to card
Co-branded credit cards typically offer exclusive benefits specific to the brand. For example, some airline credit cards offer free checked bags to people travelling on tickets purchased with the card.
When to say ‘No’ to credit cards
Beyond your budget
It doesn’t matter if it’s a restaurant meal, a new outfit, the latest smart phone, or a vacation you really think you deserve. Big or small, if you can’t afford it, don’t buy it. Don’t let a credit card trick you into thinking you should have something when it is, in reality, something you can’t afford.
Mortgage underwriters don’t want to see any changes in your creditworthiness between the time you apply for a loan and the time it closes. If your credit card utilization suddenly goes up, your credit score could take a hit, leaving you unable to qualify for the loan.
Fees is chargeable
If you’re thinking of paying your mortgage, health insurance premium or other recurring bill with a credit card in order to rack up reward points, think again. Even if the servicer allows credit card payments (many don’t), they’ll charge a fee that deflates or even outweighs the value of any reward.
Having a balance carried
If you have credit card debt, you can’t afford to use your cards. Instead, pay down the balance before you add any new charges to the mix, or you risk getting stuck in a cycle of debt.