How to prove yourself responsible as a credit card user

A credit card can be a powerful tool for your personal finances as it allows you to use money that neither belongs to your wallet, nor to your bank account.

If used responsibly, credit cards offer you zero-cost monthly loans and give you room to better utilize your own money.

It would be really great if the story could be limited within that, while it is not in real life for many as irresponsible financial behaviour regarding the use of cards often hurts their personal finance.

Like any tool though, your credit card can be harmful if it isn't used wisely.

If you are yet to know how to use a credit card, it is wise to learn a thing or two before you go to open up this type of account.

Credit cards are financial tools, and shouldn't be thought of as inherently good or bad.

Instead, it's up to the cardholder to determine how his or her cards will be used.

If you use your credit cards as a secure and convenient method of payment, while building your credit history and utilizing valuable cardholder benefits—including discounts in a wide range of products, interest-free installments in purchases—then certainly credit cards can be good for your personal finances.

The first goal of responsible credit card use is to minimize - or completely avoid - interest charges. These interest rates are imposed on your account's average daily credit card balance and can result in extremely costly charges over time. 

Thankfully, you can use a credit card without paying any interest charges to your financial institution. The key to avoiding interest is to pay your statement balances in full, and on time, every month.

When you do this, you will get to use your credit card at no monthly cost. In that scenario, you're basically receiving an interest-free loan every month, courtesy of your credit card issuer.

Alongside avoiding interest charges and debts, paying your bills on time is extremely important for responsible credit card use.

When you open a credit card account, you agree to make at least the minimum payment, on or before your statement's due date. Another important function of your credit card is to help you build credit.

By making your payments on time and minimizing your debt, you'll add to your positive credit history and increase your credit score.

Conversely, missing payments and accumulating debt will result in negative information on your credit report and a lower credit score.

But the good news is, your score will rise quickly when you pay off existing balances. Avoid leaving your card in your car or in an unsecured location where you work.

And, never loan your card to a friend. When using your card at an automated terminal, such as a shopping centre, ATM or vending machine, always be on the lookout for skimmers. 

Skimmers are counterfeit devices added to machines.

Another aspect of responsible credit card use is guarding your card's security so you don't become a victim of fraud.

A skimmer's goal is to capture your credit card information in order to use it in making fraudulent purchases. If something doesn't look right, don't swipe or insert your credit card, and let the merchant know there may be a problem.

In reality, though, credit cards will only ever be as good – or as bad – as they are used.

Like many products, they are a tool that can either be used to either cause yourself harm or help yourself out.

However, by understanding how credit cards work and how you can best use them, it may be easier than you think to use credit cards wisely.

Md Minhaz Uddin, Vice President, Head of Cards & Personal Loan at LankaBangla Finance Limited