The credit card has been a powerful tool in the finance world.
It allows cash transfers and spending to happen out of convenience for both the cardholder and merchant. Credit is given a cardholder where a credit card issuer holds a promise from the cardholder to pay on a later date.
Credit cards can either make or break a cardholder. It can create a borrower with good credit standing and build a credit score that can grant well-needed loans from licensed personal money lender in Singapore. Or it can put a borrower in debt too deep to dig out from.
Tip: watch out for promos such as credit card promo to avail discounts.
It is important that we know how to manage to own a credit card and knowing when we are ready to get one. Here are some points that can be considered:
- Income– make sure you have a source of income to support payments. Using your credit card often can lead to a regular payment scheme on your card especially when you put some of your bills on autopay/auto-charge against your card. Your income must be able to support the payments on top of your monthly expenses. In special cases, you will be revolving your credit where a budget will need to be allocated as part of your monthly expenses. These are instances where a cardholder is building their credit score.
- Credit Limit– make sure that your credit limit is less than the monthly income you receive, at most 50% of what you get out of your salary. This ensures your ability to liquidate the entire debt in cases there is a need to liquidate. Credit card issuer will usually keep increasing your credit line without checking how much you earn once you have received your card. As long as you are paying your debt and avoiding any default, credit card companies will not be reluctant to increase your limit. It is never a problem having a credit limit higher than what you are earning as long as you manage your debt properly. When you slowly feel the burden of paying off your debt, you should start liquidating what you can.
- Ability to Pay– if you are a prospective cardholder, it is essentially important to check that you can pay your monthly expenses regularly and on time. Credit card issuer are very strict when it comes to credit card debt. A default can cause your charges to grow and eventually become too big to manage.
Credit cards are becoming a necessity and having more importance compared to previous years. It is quite necessary to be responsible in managing them.