Credit cards are not without their advantages and can give you some financial freedom if you use them wisely. They provide the convenience of buying the required items when you need them, and they provide the security of not carrying cash around all the time. You also get exciting rewards in some cases for making purchases as well as fraud protection.
These are all advantages that every consumer should make full use of, but with these benefits, there are some responsibilities that can’t be neglected. Managing your credit cards wisely is integral and it can be done by understanding the terms and conditions of all your cards. Stay on top of all your payments and realize the true costs of every purchase you make with your card.
Using a credit card is a lot like borrowing money and if you’re not paying back in full each month, you’ll have to pay interest. Many people fall into this trap and needing a Kelowna debt consolidation service, or a program in their local city.
The Three Cs of Credit
Your credit score serves as a measure of factors that can affect your credit repaying ability. It’s a complex formula that considers your previous loan repayments, outstanding debts, and current income.
Credit scores are dynamic and can change very positively or negatively, but this depends on the debt you accumulate and how you manage to pay the bills. The factors that can determine the credit score are known as the three Cs of credit, which include Character, Capital, and Capacity.
Character is judged by your credit history as the lender will decide whether you possess the reliability and honesty of repaying the debt.
Capital is all about the lender wanting to know about your valuable assets such as real estate, investments, savings and personal property that can be used to repay the debt if your income becomes unavailable.
Capacity refers to your ability to repay your debt as the lender will judge if you have been working in your occupation regularly and if your income is likely to support your use of credit.
You can maximize the benefits of using a credit card if you understand your own financial lifestyle. This includes all your monetary needs and wants. Once you have determined how you will be using your credit card, the next step is to understand the features offered by the card.
Credit card providers deliver free and automatic alerts to your email and phone so that you can keep track of your available credit, payment due dates, balances, payment history, and purchase activity. Thus, be sure that you’re in the know at all times and avail this service even if a small fee is involved.
Understanding Your Rights
As a credit card holder, you’ll be entitled to some protection. Zero liability means that you will not be held responsible if you report any fraudulent charges promptly. In some cases, you also get the right to dispute purchases if the product or service is unsatisfactory.
Understanding how and why you’re using your credit card and being aware of your credit card activity can help you avoid the debt spiral that credit card can lead you into.