This article discusses the Smartest Ways to use a Credit Card. It is very easy to use a credit card. Remove it from  your wallet/purse, slide it through the credit card reader to make your purchases. That is simply not all, you need to learn more. This will help you to avoid running into debt while you build good credit.smartest ways to use a credit card

Smartest ways to use a Credit Card   ; Basics of Using Credit Cards

To start with, financial institutions or money lenders  make a certain amount of credit available for you to borrow from on regular bases.

You MUST obey the terms of the credit card agreement. Pay all your fees on time, stay within your credit limit, and avoid illegal purchases.

Purchases  can only be made with your available credit. For example, if your credit limit is $100 and your current balance is $40, you still have $60 in credit available for other purchases.

However, if you want  to pay over time, make at least minimum monthly payments by the due date  monthly. Or pay  late payments fees. Also, you’ll pay interest on any balance you pay over a period of time.

Smartest ways to use a Credit Card   ; How to Choose A Good Credit Card

There are lots of credit cards with different features. To choose the right credit card, consider the followings;

What kind of credit card do you need? Is it to pay off a balance at a lower interest rate, to build credit, earn rewards or more?

The market has the following cards; Premium credit cards, secured credit cards, balance transfer cards, student credit cards, low interest rate cards, retail, rewards and standard credit cards.

Interest and Fees. Consider the purchases APR, annual, balance transfer and foreign transaction fees. This will enable you to weigh the pros and cons before choosing a card.

Compare similar credit cards. This is very important. Compare the interest rates, fees, rewards, and perks of credit cards from many financial institutions. With this, you can choose the best card for yourself.

Your Credit Score/History. The best perks, rewards and many benefits always go to people with excellent credit score. If your credit score is low, you may not be approved for certain cards. Consider the minimum credit requirement of the card before applying. You’ll typically need a higher credit score to qualify for rewards credit cards, credit cards with promotional interest rates, and premium credit cards.

Now, after choosing a credit card, fill the card application online and wait for approval.

Credit Card Fees

Credit Card Fees are as follows:

  • Late Payment fee. You pay this fee  if your monthly payment is less than the minimum payment or you pay late.
  • Annual fee. This is a fee you pay once a year to your credit card account. Some credit cards waive the annual fee in the first year. The fee can be low or high depending on the card and its benefits.
  • Finance charge. When you carry a balance on your credit card, you’re charged interest in the form of a finance charge.
  • Balance transfer fee. When you transfer a balance from another credit card, you pay a percentage of the amount transferred.
  • Cash advance fee. If use your credit card to withdraw cash against your credit limit, you’ll be charged a cash advance fee. This is a percentage of the cash advance.
  • Foreign transaction fee. This fee is charged on purchases made in other currencies.

Transactions You Can Make

The most frequent transactions are ; purchases, balance transfers, and cash advances. Most transactions will likely be purchases, which can be made in person, online, or by phone. There  is no fee for making purchases on your credit card. But, any balances you carry on the credit card are subject to interest.

balance transfer is when you transfer a balance from one credit card to another. Balance transfers are  charged a balance transfer fee and can have to a higher interest rate than purchases.

When you use your credit card to withdraw cash from an ATM, you make cash advances. Cash equivalent transactions may also serve as cash advances. It involves overdraft protection transfers and the purchase of money orders or wire transfers.

Credit Card Interest

Financial institutions  charge interest on your credit card transactions. The interest rate is annual percentage rate or APR.

Each credit card has many APRs, they are for ;  purchases, balance transfers,  cash advances, and a penalty APR. The interest rate on your credit card is connected to your creditworthiness.

Some cards have variable APRs,  they move up and down depending on an underlying index rate, like the Prime rate.  The credit card interest rate may increase to the penalty APR if you’re behind on your payments by more than 60 days.

Earning Rewards While Using Credit Cards

For rewards credit cards, you can accumulate rewards and redeem them for cash back, travel expenses, gift cards, and merchandise.

Many rewards credit cards grant more rewards for certain types of purchases. For instance, a restaurant credit card might pay more rewards on restaurants, and outdoor dining.

Managing Your Credit Limit

If your credit card has a credit limit. Do not exceed the  limit. Overspending brings debts and additional interests that may be hard to keep up with.

Closing a Credit Card

Ensure you pay off all your balances before closing a card. Do not close an active account . If you close an account that you still have debt in, your credit score will be badly affected. Use any rewards you’ve accumulated before you close your credit card. Once your account is closed, you’ll likely forfeit any unused rewards.

Avoiding Credit Card Debt

Avoid overspending. Buy only what you need. Pay your balance in full each month, it will keep you out of debt.