Updated: Mar 9
I have heard many negatives about credit card ownership. From exceeding its limit, falling further into debt, entering third-party collections, ruining credit scores, and ultimately cutting the card in halves and canceling the account. For years, I received recurring letters from my bank to sign up for a credit card. I ignored their offer on multiple occasions because of the stories I’ve heard. I didn’t want the trouble, so I steered clear of credit cards. Until about two years ago I began reading articles on how to manage credit card balances. I have also spoken to a few persons who own them and their reviews were not encouraging. However, I decided to apply. I remembered sharing my interest with a fellow co-worker, who told me that credit cards are trouble. I had so many negative reactions about credit cards that I didn’t even want to consider getting one, but I applied online, and I was successful. Below, I will share a few tips with you, how I successfully manage my credit card balance and avoid paying unnecessary bank fees.
1. Choose a credit card with a bank you can afford.
Please note that each bank has its own terms for credit cards. Depending, on what those terms are you might find a bank that offers a lower interest rate, lower annual fees, and more benefits on their credit cards. While applying for my credit card online, I saw several credit cards that were been issued by my bank and the various charges associated with them. I analyzed the charges carefully and considered how they would impact my overall income. I knew that I didn’t travel by air, so I overlooked the credit card that offered travel points. Additionally, I bypassed a Mastercard that offered a lower interest rate because the annual fee was higher, and I wasn’t prepared to pay that much on a card yearly for fees. In the end, I chose a Visa credit card that had an annual fee three times lower than the Master card and an annual percentage rate of 47%. With added benefits of cash backs and three months no interest. Don’t be alarmed by the annual rate of 47%, as you read further, I will explain how I avoid paying interest on my monthly statement balance.
2. Never use your credit card to do cash advances.
During my credit card interview, the representative told me, not to use my credit card to do cash advances (that is to withdraw money at the ATM). The reason is that this option will accumulate an additional charge in interest that is quite ridiculous on the amount withdrawn. Unless there is an emergency with no other means to obtain cash, this option should be avoided altogether.
3. Never buy everything you think you need, even if it’s a great deal
Money is a tool used to acquire goods and services. This means we all have the power to control it by using it wisely, not the other way around. However, the management of money requires discipline on our part. If we aren’t in control of our money, then we will find ourselves in serious financial problems. This is a major issue with many credit cardholders. They are tempted to buy the things they think they need because they can be purchased on credit and paid for later. A better approach to this is to only buy items you know that you need and can afford to pay back in full by your next due date.
4. Avoid late payment.
Late fees on credit card balances are a pain, they are not only high but unnecessary on your part. Why pay the bank an additional charge that you don’t have to? They are already charging insurance and annual fees that you have no control of. With my visa credit, I avoid late fees altogether by ensuring my statement balance is paid in full, before the due date. Please bear in mind that a partial payment on your minimum balance will still attract a late fee. The minimum balance must be paid in full.
5. Pay more than your minimum due or clear the monthly statement balance.
Paying more than your monthly minimum due each month will reduce your outstanding balance and increase your chances of getting a credit line increase. With my credit card, I avoid paying the minimum due monthly. I focus on clearing the statement balance. Since paying more than the minimum due attracts interest charges. I want to avoid monthly interest charges, so I always clear the monthly statement balance. If you cannot clear your statement balance. You can still pay more than your minimum due, at least you will avoid late fees.
6. Make purchases after your cycle date.
Making purchases after your billing cycle date will allow you more time to repay those charges. For example, my credit card has a due date of the 13th monthly. My bills are printed on the 19th of each month. Say, I make a purchase on January 20th, that charge will not be due until March 13th because my bill for February was already printed from January 19th and has a due date of February 13th. Therefore, any charge made on the credit card after January 19th will not become due until March 13th. This allows me more time (over a month) to pay for the purchases I made after January 19th. However, if I made a purchase between January 1st through the 19th, then I would have to pay those charges on my February bill along with any other outstanding charges because they would have fallen within my cycle date of the 19th.
7. Try paying your monthly statement balance in full.
With my visa credit card, I am careful not to make purchases that I know I will not be able to pay in full by my next due date. I do this because I will avoid paying interest on my statement balance. Please note that paying your minimum due each month will avoid late fees, but it will not avoid interest. With my credit card interest is billed on the total statement balance and not the reducing balance. For example, my statement balance for January is $4000.00. I pay my minimum due for $500.00 by the 13th, and I pay no more until my next due date. Yes, I will avoid a late fee, but on my next bill due February 13th, I will see a charge for interest. This charge will not be calculated on the $3500 I have owing on my last statement, but $4000.00, the initial statement balance. As much as possible, I try to control these charges. I have been paying zero interest on my statement balance for over 99% of the time I have my credit card.
8. Never go over your credit card limit.
As much as possible stay below your credit card limit and purchase needed items that are within your budget. Credit card companies charge over the limit fees. These charges can be avoided if you monitor your spending carefully. I have never paid my bank an over-the-limit charge and I don’t intend to. These charges are exorbitant, and I work too hard for my money to waste it on unnecessary bank fees.
9. Avoid going to collections.
It is indeed sad that many credit card holders have ruined their credit, and ended up in collections. Protecting your credit score is paramount. Lending agencies will review your credit report before you can acquire a loan from them. Don’t allow yourself or anyone to ruin your credit, especially, if you are young. Pay your bill every month, on time, and avoid additional fees (late fees, over the limit fees, interest). A bad credit score will negatively impact your financial future if you plan to acquire loans for mortgage, motor vehicle, business, education, etc.
10. Spend wisely
In summary, you can enjoy the liberty of using your credit card, without repaying more than you must. I do hope that you will manage your credit card spending well, if you are new to the credit card industry be sure to educate yourself on the charges that you can avoid paying and steer clear of them. The horror stories about credit cards are true. There are persons who cannot acquire a loan due to bad debt, many are in collections, and many are struggling to get their statement balances down while accumulating more interest and late fees. If you are disciplined in your spending habits you shouldn’t have these problems. Additionally, review the credit card options, lending institutions, your income, and select the credit card that fits your budget. There are some credit cards with higher interest rates and higher annual fees. Yes, they may have an additional benefit (s), but if you can’t afford or will not use those benefits, then it makes no sense to apply for such cards. Also, pay close attention to credit cards that have no annual fees, you might be surprised that the interest rate on them is higher. As a visa credit card holder, I enjoy the freedom of paying a lower annual fee, cash backs, zero months interest, etc. The only fees that I look forward to paying are insurance and annual fees, only because they are mandatory. Yes, credit card terms will differ with each lending institution but it is a fact that whichever institution you acquire a credit card from you can avoid the following fees: late fees, over the limit fees, interest on cash advances, and accumulating interest on your statement balance if your control your spending habits.
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Credit scores and scoring, Credit, Personal Finance, Credit cards, Debt, Debt management