A credit card can be a great tool when used responsibly. Credit cards carry many benefits such as flexibility and convenience to buy now and pay later, help in building credit history, the opportunity to accumulate and receive rewards, and peace of mind knowing you have funds available should an emergency rise.
Though a credit card can provide you with countless benefits when properly used, it can become your worst enemy if you do not use it in a responsible manner. Before you apply for a credit card, you must understand what it takes to be a responsible borrower. Responsible credit card usage starts with you. This means always abiding by these six rules.
Six Rules of Responsible Credit Card Usage
1.Make your payments on time, every time
Before you apply, make a promise to yourself to never miss a credit card payment. It’s essential that you pay your credit card bill on time, every time. If you are late or miss a payment, you will accrue late fees and additional finance charges. Moreover, your late payments will show up on your credit report and hurt your credit score.
2.Read your credit card agreement
Make sure to read over your credit card agreement and all other materials very carefully when you open a new credit card account. It is also essential that you read any notices from your credit card company pertaining to changes in terms. Any changes could potentially change how you use your card.
3.Consider paying your balance off in full
If possible, pay off your outstanding credit card balance in full before the due date. This will help you avoid interest charges. If you are unable to pay off your entire credit card balance, highly consider paying off more than the minimum amount due. Paying down your balance faster will save you big money on interest charges.
4.Only charge what you can afford
Do not make purchases on your credit card that you cannot afford to pay. Living a borrowed lifestyle and buying things that you cannot afford with your credit cards is one of the easiest ways to fall into debt.
5.Don’t max out your credit card.
Maxing out your credit cards can really hurt your credit score, and prevent you from being able to get a loan in the future. Credit utilization is an element that helps to determine your credit score. It is calculated by taking the total amount of outstanding balances on all your credit cards and dividing it by the sum of your credit cards’ limits. Ideally, you want to keep it at or below 30% to avoid hurting your credit score.
6.Use your credit card online safely
Before you make a purchase online, make sure the website is secure. Check that the URL address begins with “https” rather than “http.” Also, check for a padlock icon either in your address bar before the URL, or in the lower right portion of the webpage.
4 Things to Never Use Your Credit Card For
Now that you understand what it takes to be a responsible credit card user, here are some things you should never charge on your credit card.
1.School tuition: You may be tempted to use your new credit card to pay for your or your child’s college tuition, however; it is a much better option to set up a payment plan with the school or take out a lower-interest loan.
2.Cash advance: If you are strapped for cash, you may be tempted to use your credit card for a cash advance. There are many fees involved with taking a cash advance on your credit card. If you have no other option, make sure to repay it as soon as possible.
3.Medical bills: In times of a medical emergency, you may be tempted to turn to your credit card. Instead, see if you can work out a payment plan with the hospital.
4.Gambling: One of the quickest ways to get into debt is to use your credit card for gambling. Many credit cards in the Philippines charge an extra fee for gambling-related transactions; others treat them as cash advances.
There are a lot of excellent credit card options available to you in the Philippines. Major banks such as Metrobank, BDO, and BPI offer great credit card products to suit a variety of needs. Before you apply for a BDO credit card online, or any other credit card, make a promise to yourself to abide by these seven rules to avoid falling into debt.