How to use a credit card wisely

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An excellent tool if used wisely, a credit card can be a burden if it’s abused. They can help users build a credit line to apply for loans, rental applications – even land a job –and they can be used to consolidate and assist in the paying off of debt. They’re particularly useful for emergency purchases such as vehicle repairs.

However, credit cards can be easily misused to the extent that they’re debt traps, encouraging people to spend money that they just don’t have. Read these frequently asked questions from first-time credit card holders or continue reading about credit cards in the UAE by HSBC to help you use your credit cards correctly.

1. How many credit cards should I have?
This is not a one-size-fits-all answer, but credit ratings are based on how much credit is available to you and your history of making timely payments on outstanding balances. It may be easier to have fewer cards with higher balances than a stack of cards that are difficult to keep track of.

2. Should I keep all my credit cards, even the old ones?
Cancelling old cards means you may be able to land better credit card deals in the future – as it tells lenders there’s less risk of you running up big balances over many cards in the future. But only cancel a card if your balance is zero; anything other than zero and you should keep it open until it’s paid off completely.

3. What are the penalties if my credit card repayments are late?
Some companies charge late fees based on your card’s balance, meaning that the lower your balance the luckier you are if you’re late making repayments. Many simply apply base default charge across the board, on tiered systems that increase the later you leave it. Repayment amounts are percentage-based depending on your account balance (usually around two per cent).

4. What happens when I exceed my limit?
Again, you will most likely be charged with a penalty fee and some vendors may decrease your credit limit. If you frequently overcharge your card, your lender may close the account. Some accounts provide cash advances on available credit card limits, and so it’s very important to keep a check on your spending habits.

5. Help! My credit card has been stolen
No one wants to receive a thousand-dollar bill from a stranger’s spending spree. If your card has been stolen or misplaced, it’s important to call your bank’s emergency hotline (they’re usually 24-hour) and cancel the card.

In addition, try to check your monthly statements and query those you don’t recognize them. More and more people are shopping online nowadays, but it’s no less important to be aware of phishing emails and security scams – don’t respond to untrustworthy inquiries for pin numbers or usernames and never share your personal information with someone you don’t know.

Using credit cards is almost an art and you just have to master it. It is a great tool and can help you in many directions and your financial life, specially when you need some help.




2 Comments For This Post

  1. ECommerce Marketing Says:

    Thanks for those wonderful and effective tips for using credit card wisely. Its been a critical issue these days of stealing cards and people feels more in comfort to apply for cards and hence it will be good to those who are using or wants credit cards.

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