A credit card will come in handy at times, but you need to use it correctly or you could end up in more than the red. As many young people have found out, using a credit card unwisely can mess up your chances of successfully applying for a home loan. And with so many people already struggling to buy property, being turned down for a mortgage because of a poor credit rating is really rough. Here are a few helpful tips to better enable you to use your credit card wisely and avoid problems.
Understand the Details of Your Credit Card
Assuming you’ve got a traditional credit card as most of us do, it’s important to understand the details of the card. Here are a few of the most important details to be aware of:
- The interest rate. The APR is the interest rate applied to your card and the purchases that you make with it.
- The annual fee. Most cards have an annual fee, though some have zero fees and a higher interest rate applied.
- The credit limit. This is the maximum amount that you can borrow, but that doesn’t mean it’s the maximum that you can owe on your card.
Here is a a little advice before you apply for Malaysia credit cards. If you haven’t yet applied for a credit card, look for one with a low interest rate and annual fee to keep your costs to a minimum. And regarding the credit limit, keep it as low as you can so that you’re not going to get in debt and over your head. Moreover, it’s also a good idea to understand the lender’s reputation and the customer service that they provide.
Understand the Difference between Borrowing and Spending
There’s a big difference between borrowing and spending with a credit card and it’s best that you realise this before you find yourself in trouble. Borrowing means going to the ATM and withdrawing money from your credit card, whereas spending entails purchasing items with your credit card. When you borrow a higher interest rate is applied than when you spend, so bear this in mind and understand that credit cards aren’t a good choice for borrowing, except in emergencies.
Make Repayments on Time
One of the most important points that you need to understand about having a credit card is the need to make your repayments on time, every time. Not only will the interest that you owe rise quickly, but you’re also working towards a poor credit score that will make it more difficult for you to borrow in the future. As mentioned earlier, you don’t want to jeopardise your chances of applying for a home loan when the time comes.
If you’re new to credit cards or you’ve been in trouble because of one in the past, it’s vital that you learn how to use it properly. Understand the card details, realise the difference between spending and borrowing and make your repayments on time, every time that a repayment is due.