Credit Cards: What Are They And How To Use Them Effectively?

Credit cards are definitely one of the most used payment methods nowadays. Do not get them confused with debit cards, there is quite a lot of difference between the two, in the case of a debit card you are using the money in your bank account, and the said bank account is linked to the debit card. 

In the case of a credit card you are not using any saved money from your bank account rather you are borrowing money front the bank, but the moment you borrow money from the bank you fall into debt, which means that you should pay back the borrowed money within a certain period of time. 

There are different types of credit cards like you have a secured credit card for people who do not want to risk their credit scores being affected, you also business credit cards for salaried people which comes with several rewards and many more. 

But remember, owning a credit card does mean that you can use borrow how much ever you want and return the same, whenever you want. There are certain rules and limitations that are applicable to credit cards.

Credit Cards What Are They And How To Use Them Effectively

For starters, the credit card you use will have a set credit limit (credit limit is the amount the bank lets you borrow), if you go over the set credit limit you will be charged high rates of interest, and also it will affect your credit score. 

Secondly, you cannot pay back the money whenever you want, you should always make sure that you pay your credit card bills on a timely basis. If you fail to do so your credit ratings will come down. 

Credit ratings or credit scores are very important, they act as a measure of well you handle your finances, and don’t forget the fact that your credit payment history is reported to the credit bureaus by the financial organizations. 

You may not realize this but having a good credit score is an absolute necessity, it will help you in the future if you want to take out a loan.

Individuals with a good credit history will have their loans approved as quickly and easily as possible, furthermore, the interest rate levied on their loans will be very less because your credit score lets the financial institutions know how capable you are when it comes to paying the loan back.

People who have poor credit scores do not have the same fortune as individuals with good credit scores.

If you happen to have a bad credit score then you can be sure that your application will take quite a long time to be approved and moreover, you will be charged with higher rates of interest depending on how low your credit scores are. 

Credit scores are rated from 300 to 850, here are brackets how the credit scores are rated 

  • 750 to 850 – great credit score
  • 700 to 749 – good credit score
  • 650 to 699 – average credit score
  • 600 to 649 – poor credit score
  • Below 600 – extremely poor credit score

Maintaining Good Credit Score

As have read so far in the article about the importance of credit scores, you would’ve understood the importance of maintaining a good credit score. That is exactly why you should make your credit card bill payments on time. 

One thing you should make sure that your debt to income ratio is kept in check, this means that your monthly credit card repayment amount should not exceed more than 45% of your monthly income and if it does then you could be in some serious trouble.

If you happen to get tangles in a situation like this and want to get out of it, you should make sure you repay your debts one by one. 

Furthermore, you should consolidate all your loans and pay them off at a comparatively lower rate of interest.

If you’re careless about your bills, you’re going to end up struggling. quite a lot of folks make credit card bill payments each month.

Whenever feasible, consider making two payments per month in order to get out of your debt. As you might have anticipated, the more payments you make, the quicker you eliminate your debt.

That being said, when you don’t, you face the possibility of being charged higher interest and other costs along the way.

Also Read: Join the Credit Club To Know About Interest-Free Loans And Much More

As mentioned earlier, you can take a loan and add it to credit debt, this way you convert debts into personal loans, this is also referred to as consolidation loans. The main advantage is you be given a fixed rate of interest. 

You should be informed that certain credit cards have different interest rates, which implies that you may not estimate the monthly credit bills. In order to make matters worse, the rate of interest on all these cards is usually high.

Interestingly, if you’ve got a consolidation loan, you could significantly decrease the interest you are obligated to pay and take a bit longer to repay the loan. 

As enticing as it is to use more and more of your credit cards, this is going to put you in a great deal of trouble.

You’re best off not spending money on internet subscriptions, various items, and so on. The smartest thing for everyone to do would be to be cautious about the money by spending it only when it’s needed.

Another factor that you must bear in mind is that the credit history decides your credit rating, which, in fact, informs you of the credit card choices that you have at your hands.

If you really want great credit card offers with perks and fair rates of interest, you would need to increase your credit rating. Trying to apply for several credit cards within a brief span of time will negatively impact your credit rating.

What Not To Do

A lot of individuals may max out the credit card, which would be a silly thing to do. That’s never a smart idea, to utilize all the money on the card. When you’re using it to the maximum extent, you increase your usage ratio, and that impacts your credit rating.

If you want to improve your credit score, which is needed to get the finest credit card and loan deals, you ought to keep the usage levels down. However, if you realize that you’re using much of your credit each month, try raising your credit limit.

Here is another extremely simple mistake that individuals make. You have to track your statements as early as possible in order to get your payments on schedule. Also, you should make sure that there are no mistakes, whether deliberate or not.

Overlooking irregularities in the transactions, such as charges and fees, can cause you to spend more than is necessary. Doing that reduces the total credit rating. Don’t you want that to take place? Evaluate your statements on a frequent basis.

Also Read: How Mobile Payments Are Changing Digital Landscape?


These are just a few of the pointers that you need to consider keeping in mind when you own a credit card because it will help you maintain a good credit rating, which, in turn, will help you greatly. Especially, when you need to take out a loan.

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