How to use credit intelligently and without harming your finances

Credit allows us to purchase goods and services in advance, without having to wait for a salary or other source of income. It is popularly known as a trust shield as it offers consumers the convenience of accessing goods and services that they could not purchase otherwise.

However, if you are not careful, you could have financial problems that are more difficult to overcome than it seems. To use it financially, you need to understand the basics of credit and how to make informed decisions about when, where, and when to use credit.

It is important to understand the difference between credit and debit debt. When you use credit, you are lending money and committing to pay it back in the future. A loan, credit card and line of credit, and monthly installments are common forms of credit. Debiting consists of disbursing money and decreasing your balance. Debit cards and contactless payment models are common forms of debit.

Details you need to know with your credit

Each time you use credit, make a list of the following items: how much it costs, when you'll need to start paying it back, what the interest rate is, what the billing cycle is, and how long it will take to pay off the debt.

Also analyze which is the best source of credit: credit card, special check, personal loan, financing of goods, etc. To get the best interest rate and payment terms, you need to have a good credit score.

Don't forget to consider payment alternatives such as bank transfers or cash payments, as they may have some type of discount. Using credit the right way will definitely benefit your finances by ensuring you can achieve your financial goals.

1. Set a credit limit you can afford

Analyze your current income and expenses to determine the amount you can commit from your finances to credit card purchases. Never, ever use more credit than you can afford because this can lead to devastating consequences

2. Buy from companies with a good service history

Check the service history of the company you are considering. Do this by looking for customer reviews, complaint information, etc.

3. Pay your bills on time

Whatever the total cost you will incur, use your credit card to pay your bills on time. Don't wait until your payment has to be processed, as this may incur additional interest charges, increasing your total cost.

4. Keep an eye out for bonus offers

Take advantage of bonus promotions when they become available. Some credit cards offer discounts, faster money transfers, premium service offers such as discounts on hotels or car rentals.

5. Take note of all payments

Keep a record of all payments made on your credit card so you don't get lost. This will help you identify billing errors in the future.

6. Keep an eye on fees and charges

When you use your credit card, you are charged with various fees, charges, and usage limits. Be aware of the costs that may be charged when using a credit card and know that they are usually in addition to the cost of the service.

7. Check the company's reputation

Like most things, there are a lot of credit card frauds out there. Therefore, it is important to check the company's reputation before making any payment. Look for credit card review sites to see what other people are saying about the service.

8. Consider having more than one credit card

If you use a single credit card exclusively, avoid exceeding your credit limit. The best way to do this is to consider having more than one credit card and avoid exceeding your credit limit.

9. Shop online carefully

Shop online safely. Verify that the transaction is processed in a safe and secure environment. Pay attention to all information requested during the purchase process and check it to ensure it is not being used inappropriately.

10. Negotiate your credit card balances

Check to see if the company has an installment program to pay off older balances. If possible, get a discount if you can pay your balance in cash.

When taking out credit is smart business

Taking out a loan can be a great way to obtain funds for projects or expenses that you may not be able to finance otherwise.

However, before taking any action, it is important to carefully consider all options. Here are some things you should consider when deciding whether getting a loan is the smartest choice for you.

1. Purpose:

Why do you need the money? If it is to finance durable assets, such as a car, property or equipment for your company, it may be worth it in the long term. However, if it's for short-term expenses, like a travel payment or Christmas gifts, a short-term loan that you can pay off quickly may be your best choice.

2. Fees:

Compare rates between financial institutions as well as their specific products to find the one that will best meet your needs.

Although the cost of short-term loans is generally cheaper than long-term loans, this is not always true. It's important to remember that rates can be negotiated, so be sure to search by rate.

3. Interest:

You need to consider not only fees but also botanical interest. It's also good to remember that with a long-term loan, you are charged accumulating interest, meaning that interest is added to the debt each month. Therefore, it is important to consider how interest will affect the actual cost of the loan.

4. Payments:

Evaluate what the payments will be like and see if you will be able to afford the monthly payment and the full payment. If your payment comes in a month when you have less cash flow, it may be a good idea to change your invoice due date to a time that suits you better.

5. Deadline:

Last, it is important to think about the deadline for paying your loan. If it is a short-term loan, make sure you have enough time to pay the money back on time. If it is a long-term loan, it is important to consider how this will affect your ability to invest in other areas.

Also Read | The impacts of inflation on the economy and your financial life