How to use a credit card?
When there is a shortage of own funds, having a credit card seems like a lifeline. However, payments in this way entail the expenditure of bank funds issued to the borrower under certain conditions and with the accrual of a fixed percentage. Illiterate use of credit cards, unreasonable spending on it can drive the cardholder into large debts. To avoid unnecessary problems, you need to know how to use a credit card with the greatest benefit for yourself.
The advantages of working with a credit card and its disadvantages
The presence of a card with a limit of bank funds for a borrower can carry both positive and negative values. The advantages of the credit card are primarily in the expansion of financial opportunities within the limits set by the bank, as well as a lot of convenience in the calculations. You can use funds in a cashless way, paying for purchases through the terminal or withdrawing cash for other expenses. It is necessary to figure out how to properly use a credit card so that there are as few negative points as possible associated with the use of borrowed funds.
The advantages of plastic include the same advantages that ordinary debit plastic has:
- Convenient calculations at the cash desks of stores, in organizations, salons, gas stations, etc.
- Registration and payment of orders in online stores.
- Payment of utility bills without leaving home.
- Comfortable money transfers through terminals and online rooms.
There are other additional benefits that help advantageous use of the card with accrued borrowed funds:
- The use of the so-called grace period is allowed when the bank does not charge for the use of the loan.
- The client can spend a little more money than is available in personal savings to buy expensive equipment, furniture, valuables, etc.
- Connecting various options allows you to return part of the money spent in the form of a cashback.
- Bonuses offered by the bank can be used, if there is such a need, for example, to participate in various promotions among partners of a credit institution.
- This method allows you to have additional financial insurance when traveling abroad, as in the event of force majeure and unforeseen situations, you can use the credit line for a short time.
- Non-cash payments by bank represent a better option than applying for a consumer loan, if you use them reasonably and correctly.
Unfortunately, not all borrowers know at least half of the functionality of credit cards and their capabilities, limiting themselves to cash withdrawals and the subsequent payment of monthly installments to repay debt. Meanwhile, there are certain rules about how you can use credit cards profitably, having minimal overpayments or eliminating them altogether from your budget.
If the borrower immediately withdraws cash for purchases, he initially does not use a unique offer of interest-free lending in the form of a grace period. After all, more thoughtful spending and planning cash and non-cash flows in your own budget could lead to free use of borrowed amounts. However, the degree of illiteracy of borrowers is usually much deeper. The source of income, not loss, can be a credit card, if you know how to use it on the best conditions for yourself.
After a bank employee has issued a card with a limit of funds, you need to learn how to use a credit card. The following information applies to all credit cards and will allow you to navigate in working with them:
- Activation . Most often occurs immediately in the department with the help of an employee of the bank. In some cases, using a call to a hotline, or using a terminal.
- Cash withdrawal is the most unprofitable procedure, the last resort, when non-cash use is excluded. The withdrawals are made in the issuer’s own ATMs, and in exceptional cases through third-party ATMs. You need to be prepared that when you issue cash, up to 8 percent of the withdrawal amount is lost. Sometimes the minimum commission is set at about 400-800 rubles for each cash out.
- Card lock – made when plastic is lost or stolen. If there is the slightest suspicion that fraudsters can use the funds on the account, an emergency block will be made by calling the hotline.
These are the main actions that you need to know during operations on this type of plastic. However, additional options and functions of a credit card are of the greatest interest, which make it possible to turn a credit card into a rather useful and profitable payment tool.
Special features and options
Each bank offers special conditions that favorably distinguish its plastic product from competitors’ credit cards. However, most credit cards have additional functionality regardless of the issuing bank:
- Grace period – represents the time that the bank provides for interest-free cashless payment on the card. For most cards, a 55-day grace period is in effect, however, some banks allow you to use funds without withdrawing from an ATM for more than 2 months. To avoid charging interest on the funds used during this period, it is sufficient to fully repay the borrowed amount to the bank. If all borrowed amounts will be credited to the card account before the expiration of the grace period, they do without interest. When receiving a card, you need to ask what services are subject to accounting in the grace period. Perhaps the bank will provide an opportunity to withdraw cash without interest, transfer funds, transfer them to e-wallets.
- Cashback – under this foreign word there is a bonus that is to be credited to the card account for the borrower using the card to pay. The amount of cashback is expressed as a percentage of the amount of transactions performed and reaches from 1 to 8 percent or more, depending on who released the plastic. Cashback actually allows you to have additional income if the borrower returns the funds spent in a non-cash way to the card account during the grace period.
- The card limit allows you to use it within the established amounts, but you can do it all the time, subject to regular account replenishment. Thus, making monthly payments or fully repaying the amount spent, the client has the opportunity to again apply to borrowed funds throughout the entire period of the card’s validity.
- Personal account and internet banking . It is difficult to overestimate the comfort and transparency of all operations on the card, using the personal account of the borrower. The service provides full information on expenditure and receipt operations, reflects the main indicators on the loan, the balance, the future payment, and also allows you to make current important payments (utilities, cellular communications, Internet services, etc.).
Tips for effective use
The following recommendations will make the most efficient use of borrowed funds:
- Paying by credit card, we must not forget that not personal, but borrowed funds are used, and the bank will demand compensation in the form of accrued interest. You should be careful about the costs incurred with the involvement of bank funds.
- If the money on the card was used, it is necessary to repay the borrowed amount at the earliest opportunity, without waiting for the expiration of the interest-free period. A credit card can be beneficial for the client if it is used for settlements in a cashless way and only for a short period. It is necessary to return the funds taken from the card account earlier than the 55-day grace period expires. If the bank can remind of the date and amount of payment, then the bank will not remind you of the expiration of the interest-free period, since this is the least profitable for the bank. It is possible to control the date of depositing funds through the user’s Internet office – all information on account transactions with the card, lent amounts and dates of withdrawal are given there.
- When determining whether it is possible to use several cards at the same time and what is the optimal number of credit cards, it is necessary to think about the purpose of their issue. The most unreasonable use of cards is the repayment of one debt at the expense of another credit card. Having exhausted the 1 limit, the borrower applies for the 2 nd and following cards, however, in the absence of the full amount of the debt sufficient to repay, a huge debt arises, which will be almost impossible to return. Thus, it is not necessary to take a large number of credit cards than a borrower can cover in a short period. However, in some situations it is possible to effectively use 2 cards, if each of them has its own special advantages. For example, a long interest-free loan period, a high cashback percentage, a bonus program actively used by the borrower. In all other cases, the release of a new credit card will be unproductive.
- Cash withdrawal leads to increased interest, as well as additional costs for a commission of up to 4-8% of the withdrawn amount. The benefit from the credit card is possible only when paying through terminals, Internet banking, any non-cash payments.
- In some cases, the credit card is taken in order to accumulate bonus points provided for the active use of the card in the shops of the partner organization, the use of its services. For example, if you frequently visit the online retail store of a bank’s partner’s partner, a significant amount of bonuses is accumulated in the customer’s account, which the partner accepts as payment for the next purchases. Often, points are taken into account in the form of a ruble amount in a one-to-one ratio.
- In addition to the cashback, which is returned to the client on the account, some lenders provide an opportunity to use a credit card to earn income as interest on the amount of a positive balance over the amount that the bank provided in the form of a credit limit. This type of income is less profitable than a bank deposit, but it allows you to turn a credit card into a profitable business, albeit with a minimum percentage.
The correct way to pay off debt
The best option to make a deposit of debt is to replenish the card during the grace period, i.e., before interest is charged by the bank. If the borrower could not repay the debt immediately, the bank begins to accrue interest on the use of borrowed funds.
Guidance on the amount and date of repayment will help SMS-alert, coming to the phone number specified by the borrower. The amount is paid up to 20-25 of the number inclusive. It is recommended to deposit funds as quickly as possible, avoiding large overpayment of interest. In this case, the use of credit cards becomes ineffective.
As a rule, banks provide ample opportunities for credit account replenishment:
- cashless way;
- in a bank;
- through a depositor or a bank terminal;
- in salons, shops, payment acceptance points of bank partners.
When depositing funds, it is necessary to take into account the period of time that is required for crediting to the account. If in the bank’s native terminals or cash desks, crediting takes place instantly and without a fee, then when transferring from accounts in third-party banks, through third-party ATMs-depositors, payment system terminals (for example, Kivi, Eleksnet, Europlat, etc.) ) a fee will be charged, and enrollment is made within 1-5 days, depending on the method of application used.
In addition to the rules on how to use borrowed money, it is important to remember that a credit card can easily be in the hands of fraudsters. In order to protect access to credit funds issued to the borrower on the card, it is recommended to keep the records with the password from the card separate from the plastic itself. It is best to leave the PIN at home, out of the reach of unauthorized persons.
When entering funds into repayment, it is important to observe the terms of payments, and when using third-party terminals or accounts of other banks – to transfer money in advance.
Using Internet banking, you cannot enter passwords for transactions that the borrower was not going to commit. Probably, the requirement to enter a password came from scammers who need to receive confirmation of write-off.
Thus, a credit card that is properly used only for a short time and for a small amount, with subsequent repayment with the nearest receipt of funds to the borrower, active use of cashback benefits, payment for services or goods of partners with the accumulation of bonuses and refusal to withdraw cash can be very beneficial and beneficial.