Full access to Entrepreneur for $5

5 basic rules to use your credit card well (and finally stop being its slave)

These recommendations will help you use the cards to your advantage and finance your business without risk or paying excessive interest.

This article was translated from our Spanish edition. Opinions expressed by Entrepreneur contributors are their own.

Specialists in personal finance advise that cardholders follow five rules, which you can well apply when using it for your business.


1. Read your contract well. It is essential that you know your obligations, but also your rights as a cardholder. And that goes beyond your credit limit or monthly payment date. You have to ask carefully for additional benefits, such as insurance in case of claims. Did you know that many cards only apply coverage against loss, theft or cloning from the moment the user reports the problem? Prior protection is something that many take for granted, and that is also not mentioned when they try to convince us to buy a card.

2. Find out about the costs of your card. In Mexico, the institutions that grant loans are obliged to inform users about the so-called Total Annual Cost (CAT), which includes all the charges inherent to a financing, such as commissions, interest and additional charges. You can review the reports published by Condusef .

3. Use your card to fund payments within your budget. If you are tempted to overspend, leave the plastic at home. At this point the elaboration of a budget becomes a key element. If you have a single card, determine what percentage of your credit line you will spend on your personal and family expenses and how much will go to business. And even if you have an exclusive card for your business activity, define in advance how much you will spend on the acquisition of merchandise or supplies, according to the orders you have and the time you can wait to recover your investment. In the case of multilevel sales, the offer is varied and you can buy from a $ 30 cosmetic to a $ 600 pair of leather boots. But if you do not budget your expenses and invest in an orderly manner, you will get carried away by offers or news and you will end up with a huge stock at home.

4. Pay the total of your balance and on time. The smartest way to use a credit card is to pay your balance in full, but it is something that only 30% of cardholders do in Mexico. In this way, you will be financing yourself for 45 days and you will avoid the payment of interest, which in Mexico can triple those applied in the United States. In addition, using your plastic properly you will develop a good credit history, which will cause your bank to increase your credit limit after a period of time and even get credit offers from other institutions. And with more financing, you can grow your business. Settle your total consumption for the period on the payment date indicated in your account statement, recommends Condusef.

5. Cancel the card you don't use. In fact, specialists recommend not having more than two plastics; one for regular payments and another with enough balance to deal with unforeseen events, such as an accident or the loss of another card. What makes no sense is that you keep a card and never use it, since that will not give you any benefit, it will not help at all to build a good credit history and on top of it it will generate fixed costs, such as the annuity.

Finally, the Condusef recommends not abusing the promotions to months without interest since they compromise your ability to pay. If you use your card wisely, you can get a lot out of it, says the entity.