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Sunday, January 8, 2023

Wise Tips! 7 Ways to Use a Credit Card Properly and Correctly

Improper use of credit cards will have several negative effects on our financial condition. Credit cards do offer a variety of interesting programs in shopping or meeting our daily needs.

However, if you do not have mature financial planning and cannot control consumptive behavior, then using a credit card will further add to your debt burden.

The following is our wise advice regarding the use of credit cards: 

7 Ways to Use Credit Cards Wisely

Use a Credit Card Properly and Correctly

1. Choose a Credit Card According to Needs and Capabilities

The first way to use a credit card wisely is to choose a credit card that suits your needs. Banks offer a wide selection of credit card types that you can use according to your abilities and needs. 

f you feel that owning a credit card is more for shopping for daily needs, then choose a credit card that works a lot with merchants providing daily needs or supermarkets.

If you use a credit card more for traveling purposes, then choose a credit card provider that offers attractive programs with accommodation and traveling services.

After you determine the preferences for using your credit card, then you can determine the credit limit. The credit limit will ultimately be determined by the bank according to the income and routine expenses that you have.

The use of an appropriate credit limit is also needed so that your credit card usage does not exceed the income per month that you receive.

So, use the credit limit wisely. Don't be tempted to increase your credit limit if your financial planning is immature.

2. Pay attention to the fees that appear and the facilities offered

After you have reviewed the types of needs for using a credit card, then you can consider the costs that arise when using a credit card.

Fees that appear on credit cards consist of annual fees, late bill payment fees, interest fees, over limit fees, and others. Make sure you know the percentage of each fee that appears on the credit card.

Currently, several credit card providers have offered 0% interest installments, so that it can ease the user's monthly installments.

3. Take advantage of the promos offered by credit cards

Saving is the third way to use a credit card properly and correctly. Saving this time means being able to take advantage of promos held by credit card providers. Use these promos to reduce your monthly expenses.

The promo can be in the form of a percentage discount when shopping at supermarkets, eating at restaurants, travel expenses, staying at hotels, and with other merchants who have worked with credit card providers. Or you can also get points that can be exchanged for certain benefits.

4. Paying Credit Card Bills On Time

Like mortgages and car loans, credit cards also have rules for paying bills on time. If the user is late in paying his bills, fines and interest will be charged later which will make his monthly bill even bigger.

If the user is late paying the bill, it will also worsen the credit score . If a prospective debtor has a history of substandard payments, it will affect approval in applying for loans at other financial institutions. Therefore, always pay credit card bills on time!

5. Pay Credit Card Bills in Full

Apart from paying credit card bills on time, the correct way to use a credit card is to pay the bill in full. Credit card providers usually provide a minimum payment of 10% of the total bill per month.

However, this will give the habit of "dig a hole close a hole" if the user does not have good financial planning. Paying bills per month in full means that you understand and are responsible for all the consequences arising from using a credit card.

6. Avoid Withdrawing Money Through Credit Cards

Another feature that can be utilized from a credit card is withdrawing money just like using a debit card. However, its use is not as popular as debit cards. In fact, withdrawing money from a credit card is the same as taking a loan from a bank.

It's another case, if the user takes money from a debit card, because the user gets the money from savings that have been accumulated for a long time. Focus on using credit cards as a means of facilitating shopping and adding assets, not being a source of cash.

7. Limit Credit Card Ownership to a Maximum of 2 Fruits

Although there is no limit regarding the maximum number of credit cards owned. However, it is recommended that you do not have and use more than 2 credit cards.

If you can't manage your finances well, then it's feared that you will add to the debt that has the risk of not being paid off.

Also remember, costs such as annual fees, interest fees as well, and other fees will increase along with the number of credit cards you have. 

By limiting credit card ownership to taste and how to use credit cards wisely, of course, this will reduce consumptive behavior.

Conclusion:

Those are the seven tips on how to use a credit card properly and correctly. The key lies in good financial planning and how you control your urge to shop.

If you manage the use of credit cards properly, surely your life will not be burdened by when and where to pay debts on time.

Sunday, January 1, 2023

Tips for Avoiding Bad Credit and Its Impact in the Future

How to avoid bad credit is one way that should be done, because anticipating is better than repairing.

Default or bad credit itself is a situation where a debtor (borrower) cannot pay debt or credit installments.

This problem can occur because in the middle of the installment period, the debtor does not have enough funds to pay it off. Until finally experiencing dismissal, delays, requests for extensions and so on.

If this situation occurs, paying off debt will be difficult, especially in installments.

Tips for Avoiding Bad Credit and Its Impact in the Future


Debt is getting bigger due to late fees and interest that continues to run. Finally failed to pay.

Factors Causing the Occurrence of Default

There are several factors that cause this problem to occur. Basically, the cause arises from the debtor and the creditor himself. Here are some common causes of bad credit, including:

Lack of financial planning by the debtor

At the beginning of the loan, the debtor is usually too imposing on the amount of credit. This large amount ultimately burdened the debtor and neglected his obligation to pay installments according to maturity.

Creditors who offer loans are too large

Not only from debtors, but this situation is also often caused by creditors. These lending institutions offer loan amounts that are too large without conducting surveys of potential borrowers regarding financial history, employment status and so on.

Therefore, to avoid the factors that cause bad credit, it is better for the creditor to tighten the credit analysis team.

How to Avoid Bad Credit

Then how do you avoid bad credit? Check out the explanation below:

1. Borrow according to your needs and financial capabilities

The thing to remember when you want to apply for credit from anyone, including banks, is to borrow according to your needs and financial ability. This means that the proposed ceiling is not much bigger than the requirement.

In addition, according to financial capabilities. Ideally debt does not exceed 30% of salary or income. If it's more than that, you can experience debt default.

Allocate debt repayments of 30% of salary. With an allocation of that size, you don't need to sacrifice the cost of your daily needs because it has been budgeted for 40% -50% of your monthly salary. This includes investment budgets, insurance, emergency funds, and entertainment.

2. Avoid Consumptive Debt

The next way to avoid bad credit is to avoid consumer debt, even though everyone who applies for a loan is the right of every individual.

Their use is also different. However, it is better to take out debt for productive activities, such as venture capital, buying work equipment, property investment, and others.

So the loan will be useful. Even produce, so that money from business capital and work can be used to pay debts.

Avoid using debt for consumptive purposes to fulfill lifestyle or prestige. Consumptive spending has a lot of disadvantages, it doesn't produce anything except spending money.

3. Do not neglect to pay debts

The consequence of borrowing or being in debt is having to pay on time. Moreover, if you borrow money from a bank or fintech lending, if you are late, you will be subject to a late fee. This will increase your debt.

Do not deliberately avoid paying debts. For example paying installments is postponed because the money is used for other needs or needs. If you have been fined, then pay it so it doesn't get bigger.

Impact of Default

1. Creditors will be short of funds

When the debtor applies for credit, he will receive money from the creditor or bank. Likewise with banks, banks will provide large amounts of money to debtors at once.

If there is a traffic jam like this, then the money cannot be rotated and ends up the bank or creditor will be short of funds. Of course this will adversely affect the creditor's business activities.

2. Debtors can be blacklisted

If a debtor has a history of bad credit, then this history will forever be recorded by the bank's system. These red notes can make it difficult for debtors to even be unable to apply for credit again in the future.

This history will be known when someone does a BI checking. In fact, several companies have implemented Fed Checking for their employees. With this history, it will certainly reduce one's credibility.

3. Threats to the country's economy

The large number of customers trapped in this situation will make banks look for other ways to improve their business capital structure.

One of them is by suppressing credit applications and reducing credit distribution in various sectors that affect the country's economic development.