Credit card management is something that we all should learn. Obviously, it is not possible for some people to get rid of their credit cards. There are various benefits to owning one after all. So if you cannot get rid of it, then you might as well learn how to manage your credit cards.
It is not that difficult to do this. It is actually quite simple. However, it does require you to exhibit self-control, and discipline in handling your credit cards. This is especially true if you have more than one card. Handling one card is not easy. If you have to handle more than one card – like 3 or more, that can be a bit challenging.
A study done and published by Credio.com revealed that 70% of their respondents have more than one credit card. The average number that their respondents have is 2.6 credit cards. According to this study, they have multiple cards because they are seeking out the exclusive benefits that usually comes with having more than one card. Others say that they simply wanted lower interest rates, higher credit limits or even low fees.
Since people obviously want to keep their cards in their wallets. If this is true for you, it is important for you to learn how to manage multiple credit cards. Remember that the more cards you own, the more that you are in danger of taking in too much debt. If you do not know how to manage your cards, you might end up maxing out all your cards. Or you could miss out on your payments. When you are late in your payments, you will waste money on the penalty charges and the fees associated with your cards.
If you want to remove the danger, you have to learn credit card management best practices.
5 management tips for credit card holders
There are 5 practices that will help you manage all your cards. If you can do this, then it is possible for you to retain your cards – no matter how many you have. Not only that, you should be able to maximize the rewards and discounts that your credit card has.
Here are the practices that you can implement so your multiple cards will never do you any financial harm.
- Own credit cards that you really use. First of all, if you will own multiple credit cards, you need to make sure that you will use them all. If not, then what is the sense of you owning it? Sometimes, we get store cards just so we can avail of on the spot discounts. If that store is a place that you will regularly go to, then that is alright. But if you only plan to shop here once, then you need to reconsider if you will get the card. If you happen to forget that card in your wallet and any annual fees that it may have, you could end up with a big debt as the unnoticed fees are left unpaid. Bottom line is, multiple cards are okay – just make sure you will use them all.
- Set a budget for each card. Another habit that you need to implement during credit card management is to set a budget for it. Regardless of how many cards you have, it is important that you determine how much you can spend on it each month. The reason for this is simple. You want to have the cash from your monthly income so that you can pay your balance in full when the statement arrives. This is how you can avoid the finance charges that can grow your balance. According to an article published on TheSimpleDollar.com, there are several ways that you can budget for your card. One is called the Zero-Sum budgeting wherein you will use your income the previous month to pay for your expenses this month. The Spreadsheet budgeting, on the other hand, require you to use a spreadsheet with two columns. On one side, you will put your expected expenses while the other will contain your actual spending. The last is the Online budgeting where you will use a software available through the Internet. This will help you access your budget even when you are outside. You can use another system that you think will work best for you.
- Have an app that will help you track credit card spending. This is connected with the last one. If you choose the Online budgeting system, you may want to download an application that will not only remind you of your budget, but will also help you track your spending. The great thing about using a credit card is that you can see what you spent on. You do not have to keep your receipts. You only have to look at your statement and you will know where your money was spent.
- Use the rewards. A great way to practice credit card management is to use the rewards wisely. Almost all cards are offered with a reward. It can be a cashback reward, a discount, or even earning points that will get you a freebie after accumulating enough. In case you do not have a rewards card, you may want to switch to one. And once you have one, it is important that you use it. This is one way for you to save money. As long as you are using your credit card anyway, you may as well enjoy the benefits that it offers.
- Monitor your credit report. The last habit that you need to develop is to monitor what is being recorded in your credit history. You may be practicing the best habits when it comes to credit card management but one identity theft incident that goes unnoticed and your financial situation will go down the drain. You need to review your credit report as often as you can. That is how you can be sure that your records are accurate and that you are not a victim of any crime.
Different ways a credit card is beneficial to your finances
Having multiple credit cards does not necessarily have to lead you into debt. As long as you can practice proper credit card management, you should be alright.
When you think about it, having credit cards is something that will benefit your finances – as long as you can keep debt off of it. Here are different ways that this card can help your finances.
- Makes it easier to track spending. When you use cash for purchases, you usually forget where it was spent at the end of the day. But if you use your credit card to make payments, you can look at your statements to remember where it all went. You can use it to compare your expenses and your budget. It will help you analyze your spending to see where most of your money is going to. That way, you do not have to do much writing or recording because all you have to really look at is your credit card statement.
- Helps you maintain a high credit score. We live in a society that puts too much importance in credit scores. If you want to borrow money to buy your own house or a car, a good credit score will allow you to get a low interest rate. That is because you are perceived to be a low risk borrower. We all know that when you have a low interest in your loan, you will save a lot of money. According to Fico.com, more and more consumers now have a good credit score – 19.9% of them score 800 and above. Having a high score is one thing but maintaining it is another. One of the best ways that you can maintain a good score is when you use your credit cards always and you pay it off diligently at the end of the month.
- Allows you to get your money back. There are so many ways that this is true. First of all, if something goes wrong with your purchase, you can literally get your money back. This is especially true for online purchases that did not arrive in the mail. Also, there are rewards programs that give you discounts when you use their cards. It can be in the form of a cashback reward or a discount.
- Can be useful during emergencies. Some experts advise against using emergency credit cards. There is nothing wrong with this if you have adequate emergency cash fund to use first. The credit card can be your fallback in case the cash is not enough. And if you know proper credit card management, this should not be a problem.
You have to realize that credit cards are not really the cause of all your financial problems – especially when the Great Recession happened. It is our own personal reaction and use of the card that led up to our debt problem. If you know how to practice the right credit card management techniques, then you should not worry about owning and using more than one card.