Having a credit card can be a game changer, especially when it comes to managing your finances. By using it for day-to-day expenses such as groceries or bills, you can keep better track of your spending habits through your credit card’s transaction history, which is often conveniently accessible via your card’s accompanying app. This makes it easy to review where your money is going and to cut back on unnecessary expenses that you usually overlook. Additionally, credit cards like the Landers Cashback Everywhere credit card by Maya also offer generous rewards and cashbacks, allowing you to get more savings out of each purchase.
Fortunately, Filipinos can now enjoy easy credit card application Philippines processing. Many banks now allow the entire application to be accomplished online or via an app, making credit cards more accessible to people looking for a financial tool to help them manage their expenses.
That being said, many new credit card owners get too enthusiastic upon receiving their card, which can lead to unnecessary spending. If you’re a first-time credit card user, here are some tips to keep your credit utilization at a reasonable level.
1. Set a Monthly Budget Based on Your Income
A common mistake that some credit card owners make is thinking of their card as an extension of their income. Thus, they end up buying things that are beyond what they can afford, leading to overspending and even debt.
You can avoid this by setting a monthly budget for your credit card usage based on your income. A good rule is to keep credit spending within 30% of your monthly salary. If you earn Pho 25,000 monthly, then try to keep your credit card utilization below Php 7,500 per month. By setting a spending limit relative to your income, you can ensure that your credit card bill will always be within the range of what you can comfortably pay.
2. Use Your Credit Card Only for Essentials
Because of how easy it is to use credit cards, many card holders often get carried away and end up overspending on online shopping, food takeouts, and other impulsive purchases. Doing this can max out the card’s credit limit faster, which can make repayment more difficult down the line. Moreover, a maxed-out credit limit also restricts the card’s usability, since part of the bill needs to be paid first in order to free up credit to be used.
To prevent unnecessary spending and its consequences, restrict your credit card use for essentials only such as groceries, bills, or medical expenses. Before you purchase an item with your card, ask yourself first what value they provide. Also, if there are more affordable yet equally functional alternatives, then consider buying those instead of luxury brands to save money without compromising quality.
3. Track Your Expenses Regularly
Small purchases may seem negligible, but they can quickly add up before you know it. This can cause unpleasant surprises once you get your monthly credit card bill. Regularly tracking your expenses through your card’s transaction history lets you avoid such surprises as you’ll always be informed of your running total and how much credit you’ve already used.
Another benefit of keeping an eye on your expenses is that it lets you spot fraudulent or inaccurate transactions right away. For instance, if you notice that you ended up getting charged twice for a purchase, you can then dispute it with your credit card provider right away rather than have to pay a higher total for something you didn’t buy.
4. Train Yourself to Pay Your Balance in Full
Credit cards allow users to pay only a minimum amount due each month. However, try to make it a habit to pay your balance in full every month instead. This frees up your credit limit to be used for the following month and you also won’t have to worry about interest charges slowly piling up over time. Even in months when you can’t pay in full, at least pay more than the minimum amount to reduce interest charges. This mindset can help curb overspending you’ll have to think twice before spending, knowing that you’ll have to pay for it in full at the end of the month.
5. Use Credit Card Promos Wisely
Many credit card promos like 0% installment and cashback can help you save money, but make sure you’re using them strategically. For instance, use your credit card to get cashback on staple expenses such as bills and groceries to lower your usual budget for these essentials. Meanwhile, for necessary big ticket purchases such as appliances or a laptop for work, use 0% installment to spread out the cost at no further expense. The key here is to apply promos on things that you’ve already planned to spend on and not to buy things recklessly just because there’s an ongoing offer.
6. Utilize Cash Advance Sparingly
In cases when you need cash, your credit card allows you to withdraw part of your credit limit through a cash advance. While this can be a lifesaver during emergencies, cash advances come with higher interest rates than regular credit card purchases. Thus, they should be reserved for when absolutely necessary and not for making luxury or non-essential purchases. By only using cash advance as a last resort, you avoid accumulating unnecessary charges on your credit card bill and also keep your credit limit free for regular use.
Your credit card can be an invaluable tool in managing your expenses while also helping you earn rewards along the way, but only if you use it responsibly. By following the steps above, you can spend wisely and within budget, all while still ensuring that you maximize the benefits your credit card has to offer.
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