Just because you have a credit card, doesn’t mean that you must immediately start using it for unsensible purchases. The whole point of getting a credit card is to build and extend your credit, and this takes planning, maturity, and controlled spending habits. Any benefit achieved with multiple credit cards ultimately depends on the credit cardholder and how they manage their finances. If you build up a large balance on your credit card, the fees and interest start adding up quickly, and you will soon be looking for financial help, which is something we all want to avoid.
There are many ways to spend sensibly with a credit card, even some tricks to reduce spending without doing anything, like getting a balance transfer credit card with a lower interest rate. Most of this will fall squarely on the shoulders of the credit cardholder, and the right spending habits will ensure you have a bright credit future.
Here is a 6-step credit cardholder’s guide to sensible spending:
1. Know Your Budget
Whether you are a credit cardholder or not, it makes sense to follow a budget every month. Being financially responsible is going to do nothing but good for your future, so take the time to look carefully at what you’re spending each month. Having it all laid out in front of you, may even give you an opportunity to reduce some monthly spending as well.
Having a budget to reference will ensure that you do the right thing with your income and that your hard-earned money is doing what you want it to do. You will also be able to automate as many monthly bills as possible with your credit card. This way you build credit by simply paying your bills each month.
2. Save For Large Purchases
A lot of people will often consider making large purchases with their credit cards, as we all have a tendency to be impulsive at the best of times. Unless you already have the money set aside to pay for this purchase, you could be putting yourself into financial difficulties. It is always best to save for any large purchases, then make them on your credit card with the ability to pay the bill off before incurring fees and interest.
If you do decide to go ahead with a large purchase, make sure you understand every line of your credit card agreement. Fees and interest rates can make a large balance even larger in the blink of an eye, and if you aren’t prepared, it can make life difficult going forward.
3. Don’t Be Impulsive
Now, this isn’t telling you to put that box of crisps back on the shelf, or that lovely chocolate bar you’ve been dreaming about all day. Large, impulsive purchases can turn a person’s financial situation upside down quickly, as that money always has to be paid back somehow. Just make sure to think rationally when considering any impulsive purchases, as sometimes this type of buying can burn a larger hole in your pocket than you anticipated.
4. Don’t Forget Fees
When you signed up for your credit card, you were responsible and paid attention to all of the little details and fine print, right? Of course you didn’t, none of us can retain all of that information, which is why we get hard copies of it. Make sure you understand what fees you can be charged for various things, as sometimes these fees can add up astronomically if you don’t understand your agreement.
5. Remember, Interest Isn’t Interested In Excuses
As with those fees, interest is never going to be an excuse, and it will just keep growing until it gets paid off. If you hold a large balance and only make minimum payments each month, you may not even be touching the principal amount of what you owe. Take the time to understand your interest rate, and how it works, as it could end up saving you a lot of money in the long run. Credit providers make money off interest, and it is in their interest for you to have no interest in how it works.
6. Do Everything You Can To Live Within Your Means
While living within your means is getting more difficult these days, that doesn’t mean that it can’t be done. Living a little more frugally, you can still enjoy life, save, and improve your credit score in the process. As long as you use your credit card for the right purchases, and ensure that the balance is paid out each month, you should see nothing but benefits from being a credit cardholder.
When you start living beyond your means, and beyond your earned income, it starts a snowball effect, and it’s difficult to stop once it starts. It may seem tempting to make bigger, more elaborate purchases with your credit card, but in the end, making sensible decisions will help to protect your financial future.
