by It’s easy to get burned on credit cards if you use them incorrectly.
Some are afraid of credit cards and believe that this is a sure road to credit slavery. Others do not see anything wrong with credit cards and use them without consequences. Here, as elsewhere, the rule of the golden mean works. How can you use a credit card, and how not?
In this article, experts from SPV Mortgages have explained important tips about how to use credit cards that will help you to improve your credit score .
Contents
How not to use a credit card
1. Use it as a substitute for consumer credit
This is where most credit card problems begin. Credit cards have a so-called grace period, that is, a period set by the bank during which you can return the money without interest. The difficulty lies in getting the money back on time. Some people issue credit cards, knowing that within a few months, how long the grace period lasts, they will not be able to return the funds. Then the credit card turns into a consumer loan, only the rates are higher here. The temptation to get a credit card is also higher: no need to apply, wait for approval. And when paying off the debt, it remains possible to continue to use the money and there is a risk of returning to a negative balance.
2. Cash out money at an ATM
In many cases, cashing out occurs without a grace period, and even with a withdrawal fee. So the credit card again turns into a replacement for a consumer loan, only even more unprofitable. There are cards from which you can withdraw a certain amount during the interest-free period, for example, 30 thousand per month. But many banks, advertising this option, are silent about the fact that it only works during the grace period – that is, the rest of the time, interest is dripping.
3. Transfer money from a credit card to other cards and electronic wallets
Here the meaning is the same as with cashing out. Interest is also charged for transferring funds.
How can you use a credit card
1. Spend money on unplanned expenses and fit into the interest-free period
Let’s say you have free money, but they lie in a bank account or in other profitable instruments. And you have unplanned expenses. If you withdraw money from your deposit or withdraw it from other investments, you will lose interest. Then you can use a credit card – pay the necessary expenses with it, and then return the funds during the grace period.
2. For booking hotels and cars abroad
Some companies do not allow you to book cars even with a deposit on a debit card. In hotels, the deposit or the full cost of living is often frozen, and this money cannot be used for some time. In this case, you can use a credit card.
3. Spend money from a credit card during the grace period, and put your funds on a deposit at interest during this time
Financially advanced people manage to earn a small income in this way. Suppose a credit card has an interest-free period of three months. At this time, you spend money from a credit card, and your money for the same amount lies in a depositor account with interest on the balance. That is, the money to pay off the debt is immediately. But, since interest is charged on them, by the end of the grace period, the amount of your own funds will increase slightly. With it, you pay off the debt, and then repeat the whole process again.
In this case, you must be very careful with the conditions of the interest-free period. It is at this point that credit organisations like to do without specifics, which is why a person spends money confidently, and then suddenly receives a debt with interest.
5 Top Tips to fix your Credit Score
Struggling with debt and looking for quick fixes to repair your bad credit rating and get back on the straight and narrow. Below are 5 Top tips to help you fix your credit score…
1. Check your Credit Report
Before you apply for any further loans or credit cards, it’s important to check your current credit rating. You can use a company called Credit Expert and get a free trial for 30 days. Check what issues are on the report and try to fix any highlighted problems that could be affecting your overall credit score. Don’t forget to cancel the free trial as soon as you get your report otherwise you may be charged a monthly subscription fee.
2. Avoid making late payments
Got credit cards and need to make regular monthly payments. It’s important you don’t miss payments. Make sure you make these payments on time to at least cover the minimum payment or more if you can afford to. Set up a standing order with your bank to make sure you are never late.
3. Clear any debts you may have
If you have a history of debts behind you, then any new lender will look at you with a red flag. Why would they want to risk lending money to someone with a bad credit history? Paying off your debts and managing these payments regular shows to the new lender that you are likely to meet the loan agreement and not run off with their money
4. Don’t apply everywhere
Be careful and do some research when you are applying for a new loan or credit card. Use the credit report that you obtained above to find out your credit score. If you have a poor credit rating then only apply for credit cards or loans where they accept people that have bad credit history. Applying to too many companies can affect your credit rating as each time you apply a credit search is made by the lender.
5. Rebuild your Credit with new Credit
Taking out new credit is one way to help rebuild your credit. But only if you use loan or credit card companies that accept bad credit ratings such as payday loans where there is no credit check. Although these are expensive on paper, they are only a short term finance solution usually used by people that need money in emergency situations. These can also be used to rebuild your credit score.
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Author Bio
Name – Jonathan Veers
Bio – Jonathan is Founder of SPV Mortgages. SPV Mortgages can help you find the best limited company mortgage options to push your property investment dreams forward. We can help you unlock the door to more profitable buy-to-lets via the tax-efficient route of limited company mortgage products. You can easily find out the impact that expenses and tax will have on your buy-to-let profits in seconds with our handy BTL tax calculator tool.
