The credit card business is one of the most profitable businesses for banks. In fact, it is estimated that on average a credit card customer contributes 20 to 60 euros profit annually to the banks.
This means that the more credit cards there are, the more money the bank gets. It will be understandable that there is so much credit card offer in the market.
With this I do not intend to influence anyone to stop using the credit card, even because I consider it an essential tool for managing the monthly budget. However, you need to know how to choose the best credit card and abide by some key rules.
Today we will put 3 more tips to add to the immense ones already available here. The idea is to always manage your credit card well, reduce benefits to achieve financial success.
Know Your Credit Card Closing Date
We all know that with each purchase with the credit card your user can benefit from a free credit period ranging from 20 to 50 days.
As we all use the credit card efficiently because we only make purchases that we intend to anticipate 50 days, because after 50 days we will pay the totality of the credit card debt avoiding the revolving credit and the collection of interest, we need to know the closing date of the credit card statement.
Basically, if you buy one day before the closing date you will only benefit from 20 to 30 days at the most. If you buy a day after the closing date you will benefit from 30 to 50 days. Another 20 days make the difference if for example you have your money in a treasury or monetary fund will receive another 20 days of net profitability.
Do not Use the Emergency Credit Card
Emergencies should be planned and guaranteed, that is, you should follow our tips for personal finance and start today to create an emergency fund for this purpose. What happens is that most people do not have an emergency fund and when they need money they use their credit card.
There are also people who have an emergency fund, however, they resort to credit card to deal with emergencies. This is because they believe that if they take money out of savings they will never put it back and forget that if they do not pay the credit card debt within the free period they will simply lose money on the interest charged.
This picture is not well understood, but I believe that the feeling of fear of many people does not allow them to think clearly. Therefore, avoid using the credit card for emergencies, as the habit of using it for these situations may harm you in the future.
The Credit Line Is Not Your Money
Effectively we all understand and know that the credit line credit card is not money that belongs to us. However, most people calculate this availability of money as net worth, that is, know that in addition to the money they actually own, they still have an associated credit line.
This calculation affects the psychological ability to make decisions based on our real availability, allowing the credit card user to be able to decide with money that does not have.
How many times did you want to own something and the first thought was to use the credit card to satisfy that desire?
This is an example of credit card counting credit card as net worth, ie the line enters as money you have to buy something you want.
Many people will hardly be able to manage this mental process because the ease of access to money is at the distance of 4 numbers that are limited to the credit card PIN. It’s a huge temptation that can only be fought if you avoid carrying your credit card with you only for planned purchases and as knowledge of all the pros and cons.
If you already have difficulties paying your credit card debt, we suggest that you consider contacting us for free advice on the best alternative to settle them. If you wish, you can also enroll in one of our personal finance courses and see the potential savings that 3 hours can bring to your life.