Before you go out and swipe that card at the counter ask yourself these questions. Have I fully paid my previous balance? Do I have cash in the bank to pay for the items once my credit card statement becomes due? Is my available credit enough to pay for the items?
If you haven't paid the full amount of the balance due or only paid the minimum due, avoid using your credit card. Using your credit card after paying only the minimum payment of your Credit Card bill will result in a monthly interest of 3.5% per month on the remaining balance. This may look small but when you compound the interest in 12 months, it will result in a 51.10% annual interest rate. If you paid on time but less than the minimum payment required, you will be charged an interest of 5% per month or 79.59% PER ANNUM!
Another important thing you should avoid when using your credit card is NOT PAYING YOUR BILL ON TIME. Instead of paying a monthly interest rate of 5%, you will be paying a monthly interest rate of 7% or an annual interest equivalent to 125.22%. Although most credit card companies will do their part on reminding you to pay your unpaid bills, it is still the responsibility of the credit card holder to regularly track their credit card bills.
Always track your credit card expenses. It doesn't have to be a very complicated spread sheet. All you need to do is to list all your expenses and payment along with their respective dates. You can also place what item you purchased on the particular expense so that you can trace your credit card expenses if you plan to lessen your expenses. Tracking your credit card use will also prevent you from spending over your credit limit. Some Credit card companies will allow you to swipe your card even if you are already over your limit, some companies will decline your credit card. Credit card companies will charge you interest rates similar to the fees they charge on minimum payment if you go beyond your credit limit, others will charge you a higher rate.
If you responsibly use your credit card, you will be able to take advantage of the various perks of your credit card. You will be able to spread your payments without incurring interest and some credit card companies even offer lots of freebies asides from their rewards programs.
Note: Interest rates are Based on Philippine Credit Cards