Revolving Debt with a Credit Card
As we all know, credit card loans are defined as revolving unsecured loans because they are available to you at all times once the cards are issued. You can use the credit card loans to pay for anything you need and repay the loans at your own pace as long as it is within the guidelines or boundaries set by credit card issuers. As a revolving debt, credit cards are very flexible. To maximize the advantage of using your credit cards, here are a few basic tips you need to know.
First of all, maintain only a small number of credit cards. It is tempting to get as many cards as possible, especially since applying for one is very easy to do, but that will only increase the risk of misusing the revolving loan facility even more. Although they are classified as revolving loans, credit card debts still need to be repaid.
Understand the policies set by the credit card issuer before deciding to apply for the loan facility. Knowing exactly what you are getting into is the first key to responsible use of credit cards. Understand the interest rate, additional fees and charges you will have to endure when using the credit card, and of course the general terms and conditions (i.e. when interest is charged) properly.
Most, if not all, credit card issuers waive the interest rate and other charges when you repay the loan within a certain period of time. For example, you can use your credit card for paying bills and avoid interest by repaying the credit card loan within 15 days of the transaction date. To increase the advantage of using credit cards, this offer is certainly very useful.
Avoid paying the minimum payment if you want to keep the loan principal amount - and the overall cost of using your credit cards - at minimum. Credit card companies allow customers to pay as little as 5% of their bills on each billing cycle, but that doesn't mean you can't pay more to reduce your credit card bills faster.
Last but certainly not least, only borrow the amount you can afford to repay. It is very easy to increase your credit card limit all the way to Unlimited, but doing so without knowing how to use it responsibly or understanding the amount you can afford to borrow would be a mistake. High credit card limits don't mean you have to max them all.