The year 2021 is going to end and before giving it a goodbye, we must analyze how the year was and learn some financial lessons from it. Due to the Covid pandemic, a lot of people faced a financial crisis this year and they might have understood the importance of saving or having a backup option, like a credit card. Moreover, some of you might have overspent with your credit card on online shopping and other things. Everyone makes mistakes and that’s not actually a big deal. The best thing is to learn from your mistakes so that you don’t repeat the same thing in the future. If you are a credit cardholder, the following are some financial lessons to learn from 2021 and follow them strictly in the year 2022 so that you can make it the best financial year ever for yourself:
1. Never Consolidate Credit Card Debt
If you are a credit card user, you might be knowing the importance of making timely payments of your credit card bill. This is the only and the best way to get the most out of your credit card and keep your credit card journey smooth. If you miss your credit card bill payment very often or you pay only the minimum amount due, it can lead to debt consolidation which affects your financial health badly. Moreover, a lot of credit card holders think that paying only the minimum amount every month is enough, but that is not true. You can only avoid the late payment fee by making the minimum payment, but the interest keeps increasing on your outstanding balance. Increasing debt on your credit card doesn’t only affect your credit score, but can also make you feel mentally and financially disturbed. So, it is always better to pay off your full credit card bill every month, or at least pay more than the minimum amount.
2. Accidents are Never Pre-Planned. Use Your Credit Card As An Emergency Fund
In the covid pandemic, many of us faced unexpected accidents. Not only health-related issues, but a lot of people faced a financial crisis as they lost their jobs or they lost the ones who used to earn for them. Such medical or financial emergencies can, unfortunately, occur anytime and the problem becomes even bigger when you don’t have a solution. You must have savings or some backup to cope up with such a situation, but if you don’t have anything, you must use your credit card. However, it is very true that you shouldn’t spend your whole credit limit as it affects your credit score negatively, but your credit score is not more important than someone’s life. If you feel that you have spent a really big amount due to an emergency, you must consider converting your credit card bill into EMIs so that you can repay it easily in parts. You can also take an instant personal loan against your credit card if you need urgent funds in the form of cash as it is way better than taking cash advance with high charges and interest. So, you should always have a credit card so that you can use it when nothing works. This is one of the biggest financial lessons to learn from 2021.
3. Make The Best Use Of Credit Card Reward Programs
The Reward Points offered by credit cards are one of their most attractive features as individuals, who don’t even need a credit card, want to have one so that they can earn and save more & more reward points. But being a credit cardholder, you must be aware of the fact that just earning reward points is not all you need to do. In order to get the maximum benefit, your first step should be to choose your credit card wisely according to your requirements. Different credit cards are best suited in different categories, so you should choose a card that can earn you the maximum reward points in a category where you spend the most. Moreover, you should know how you can redeem your reward points for the maximum benefit. Your card may provide a lot of redemption options with different values of reward points for each category. You must check for all the available options for redemption and then redeem your points against the one that seems to be the most useful and beneficial for you. Always make sure to redeem your reward points before their expiry date.
4. Only Spend On Things That You Really Need
A lot of people start overspending as soon as they get a credit card, but this is never a good idea. Overspending on your credit card can affect your financial health badly as you may find yourself unable to repay the amount you have spent. Always remember that only you need to repay the amount later and never spend more than you can afford to pay. It is true that credit cards give you the purchasing power and hence you can make big purchases. But spending a big amount each month is not advisable at all as it will consolidate a lot of debt and can also have a bad effect on your credit profile. So, you should prepare a list of everything you need to buy with your credit card and make sure to keep only the important things in it. Still, if you feel that it is going out of your budget, try to filter out the least required things and don’t purchase them until you really need them. You must keep track of your expenses and stop spending on unnecessary things. This is how you can save more & more and build your credit profile along with that.
5. Don’t Share Your Credit Card Information With Anyone Ever
The card issuers and card networks try their best to secure your credit card information, but still, credit card fraud cases are increasing every day and that is only due to the mistakes that the cardholders make unknowingly. Everyone should be aware of the fact that their financial information needs to be kept a secret. You should never share your personal financial information like CVV, PIN, OTP, etc, with anyone, not even with someone you trust blindly. Even if you are giving your card to any of your family members for one-time use, try to make sure that it is being used in front of you and change all the passwords and PIN right after that. A credit card is a very personal thing and should not be handed over to any random person. You should promise yourself that you will be very careful with your financial information so that the problems like identity theft, credit card theft, etc, get reduced.
These were some of the lessons that you should learn and keep always in your mind. Your credit card can be a blessing for you if you know how to use it responsibly and wisely. But, if you are not careful about the same, you may find yourself stuck in unmanageable debt, which will affect you financially as well as mentally in a very bad way. With the new year, you should welcome some good financial habits so that you can make it the best year in terms of finances.
Team Cardinsider wishes you a very Happy New Year. May your new year be filled with joy and you develop all the good financial habits.