While reading a book sometime back, I came across this beautiful quote, “The poor is no longer not just having enough, but poverty is in fact, not having more than the debts you owe” and I tried relating this thought to an acquaintance of mine, whose become the owner of a recently issued bank Credit card. Irfan, look at you – you’ve gotten your first credit card, after that long spiel from the bank and those multiple phone calls and you’re probably feeling a little bewildered. You’ve gone from slogging it out at College to your first job and now you’re making your way to some sort of financial independence. It’s these little victories that make up the rite of passage to adulthood – is this what they call ADULTING.
Simply put, it also a watershed period – You taking on financial responsibilities. Having a credit card definitely has its perks -Swipe, Wave, Sign…. all of these – New stuff! In practice, it also means a truckload of responsibility that may become a burden and the last thing you want to do is get yourself right into debt (interest can snowball and you can rack up the Credit Card bill that will never be paid-off, quite literally) which lands you right back at square one.
I am going to jot down a few honest and really helpful tips that can lend some assistance to the end users. For now, digest the below info and see whether you really need to hit “Add To Cart” on those really good-looking pair of shoes.
First and the foremost, you need to know your limits, set it, and not max out your credit card. Having a credit card with a high credit limit might make you feel invincible at times. But make sure you have sufficient money to repay the full amount. Even if you have sufficient savings to make repayments, it’s advisable to stop using it, if you’re close to maxing out as you may need the extra-credit for any exigencies. Credit card purchases will usually be declined if it exceeds your credit limit. You can call the bank to request for a temporary credit limit increase, but you’ll need to take note of the new due dates for repayment. Else, the fees and charges will be hefty!
You need to pay on time and in full. This is so important. In fact, the most important! A good repayment behaviour on your card lays the foundation of a decent credit score for the long term. If you consistently miss the deadline of your monthly payment, you’ll incur costly interest charges and your credit score will also take a hit. Set a reminder on your phone or initiate a standing instruction on your savings account that will automatically make the payment on the due date – So savvy!!!
A key feature to be always kept in mind is to never view your credit card as an access to endless possibilities. Sure, a lot of these banks can draw you in with all sorts of fancy promos, but study the fine print and know what you can. If you want, go to your bank and talk to the concerned executive directly to know what benefits you can reap from using your credit card. Know the features and benefits of your credit card like the back of your hand. If you’re using a cash-back credit card, always know what are the categories that earn you the most cash-back, what are the minimum spends, and if there are any cash-back caps. Once you know this, you can maximize your rewards and get the best card for your lifestyle and expenses.
Let me put it in more simpler terms, you need to keep track of your money. If you’re the “InDenial type”, then you’re probably not meant to own a credit card. The truth hurts. So if you think you won’t be able to keep track of everything, then you’ll probably slip into debt faster than you can.To make it plainly obvious. It’s incredibly important for us to keep a close eye on our expenses, so we know if we’re overspending in some areas, or if we’re on track with the budget for the month. These days, tracking expenses is so much simple. There are expense tracking apps to download, or you can use your bank’s mobile app to get a rough gauge of your spending. It’s up to you. With apps, you’ll be able to manually input everything you spend on to get a holistic picture. Banking apps tend to offer a limited view because they cannot track cash expenses or transactions made using another bank’s credit card.
Lastly, a few key pointers to beat that debt. Read and understand the terms and conditions associated with your credit card. Don’t spend just to get rewards or cash rebates. Don’t use your credit card to withdraw cash unless it’s an emergency. Always remember – use it when money matters as No Man’s credit is as good as his money and it’s a lot of fun until you get the bill.
Keep in mind that the best person to “face” the problem is also the best person to “fix” the problem – that is YOU.
(Ifthikar Bashir is a freelance Financial Advisor)
cgc.srinagar@gmail.com