Credit cards allow you to make large purchases, take family vacations and purchase products online.
As Coopealianza We always think about improving the lives of our associates, we share recommendations to correctly use this financial instrument and avoid headaches.
Types of uses of credit cards
- Card Present Transactions: This is when a purchase is physically made by inserting your card into a card reader. You sign to complete the purchase, in most cases.
This type of transaction is the one that applies when we go to a store to buy clothes or shoes, for example.
- Card Not Present Transactions: When the card number is used to make purchases online. In this case, the account number, expiration date, and security code from the back of the card are entered to authorize the purchase. For example, when we buy books or sports items on Amazon.
In other words, credit cards are very useful, but it is important to use them well.
Recommendations to correctly use your credit card
- Pay more than the minimum balance each month. Credit cards generally do not require a balance to be paid in full each month, but do require a minimum monthly payment. This amount depends on your creditworthiness, your credit limit and your current balance. If you only pay the minimum, the remaining balance begins to accrue interest. That little detail can get out of hand. Therefore, if possible, pay more than the minimum.
- Your credit limit is a limit, not a target. If the card has a limit of $1000 for example, it is not a general permission to spend an extra $1000 each month. It is not a salary nor is it gift money. It is a loan and you will have to pay it back at the end.
- When you accept a credit card, avoid paying fees. Some card issuers charge, in addition to interest, annual fees or transfer or money advance fees. Research the conditions of your card well and do not accept anything that harms you. All those extra charges are avoidable.
- Don't depend on your credit card for everyday purchases. Ideally, you can cover your day-to-day expenses with your income. Credit cards are for special expenses. Better make a budget, eliminate ant expenses and use your credit card responsibly.
- Meet emergency expenses with a dedicated fund, not your credit card. Where possible, save for contingencies.
Finally, if you have a credit card, be on time with your payment dates, pay more than the minimum balance, and check your account statement every month. It is important that you keep track of how and when your card is used. If you detect any irregularity, contact your financial institution immediately.
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