There is plenty of doubt and controversy when it comes to acquiring a credit card. Some people are hesitant to apply for one because they feel like it would only burden them. However, if you know how to use it wisely, a credit card would be extremely beneficial to your budget plan.
Preparing for your expenses and knowing where your incoming funds will go is essential in ensuring you get to live a comfortable life. That’s why we prepared this article for you. Allow us to teach you why you need a credit card and how you can keep track of your credit card usage.
Benefits of Having a Credit Card
There might have been one or two times when you need to pay for something, but you don’t have the cash with you, or your monthly salary hasn’t arrived yet. Let us introduce you to a special tool that will help your budget plans; a credit card.
Convenience
The first benefit of having a credit card is the convenience. You don’t have to carry cash around with you anymore because payments can be made through a credit card. In addition to this, plenty of establishments already accept credit card payments nowadays, and that makes everything easier for you.
Security
Another important advantage of a credit card is security. You can avoid fake sellers because the charge to your account will only reflect or be made once the item or service you paid for is already with you.
Advanced Money
Lastly, credit cards allow you to have advanced money. Imagine that you need something urgent, but you need at least three months’ worth of savings to purchase it. A credit card will allow you to pay for it, and the good news is that most credit card providers or banks let you pay in advance at zero percent interest. Furthermore, a good score on your credit card allows you to apply for mortgage loans and buy a house under your name.
Things to Keep Track of When Using a Credit Card
Most people who are hesitant to apply for a credit card are almost always those who do not know how to use them properly. For wise credit card spending, here are some things you need to keep track of.
Payment History
Your credit card payment history keeps track of all your settlements. All the information about how much you owe, how much you’ve paid, and how often or how timely you’ve settled the payments can be found here. This will help you make necessary changes to increase your credit score, and you can also monitor if there are discrepancies in the payments you’ve made.
Credit Card Utilization
This refers to the percentage that determines the relationship between your total debt and your total available credit. This indicates how efficient you’re using your credit card. Getting a negative mark on your credit card utilization record can negatively impact your credit report.
Derogatory Marks
While we’re on the topic of negative impacts on your credit report, now is as good a time as any to talk about derogatory marks. These are indicators of unwise usage of your credit card. Missing payments, foreclosure, and repossessions are some of the most common derogatory marks. These will often stay in your credit report for up to seven years, and it will be harder for you to apply for a new credit card account or a new loan if these marks pile up. Knowing how to get rid of derogatory marks in your credit card report is important in increasing your credit score.
Credit Age
One common misconception about credit age is that it refers to the amount of time you’ve had a credit card. However, this is not often the case. If you have multiple credit cards, then your credit age would most likely be different. Credit age is determined by adding the age of all your credit cards and dividing the total by the number of cards you have.
Total Accounts
There are many types of accounts that you can use on a credit card. These can range from student loans, auto loans, and mortgages, among others. This is important because your credit behavior with each account will significantly affect your credit score.
Hard Inquiries
This is a lender’s request to pull up your credit report. This usually occurs when you apply for a new credit card or a new loan. A creditor uses this information to determine whether you are a high-risk or low-risk borrower. Having a high number of hard inquiries may negatively affect your credit score. That’s why you need to be wise on how you use your credit card to avoid hard inquiries.
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