Credit cards are useful to those who possess financial discipline. (Rawpixel pic)

Not everyone should have a credit card, especially people who have a tendency to misuse them because they are not financially savvy or responsible.

People like these can destroy their finances in a short time. But, if used wisely, credit cards can help build wealth.

This article discusses how to be a wise credit card user.

1. Settle all bills on time

The key words are “all” and “on time”. If the credit card bills amount to RM2,000 for the month, settle it in full before the due date.

Making partial or minimum payments means paying high interest of about 18% a year on outstanding bills that are carried forward to the following month.

2. Use less than 30% of the credit limit

Assume someone earns RM4,000 a month. They can apply for a credit card with a credit limit of twice or three times their salary, in this case RM12,000.

The trick is to keep spending at 30%, or RM3,600, of their RM12,000 credit limit. Bankers will view them as conservative in using credit cards, hence, profiling them as a low-risk borrower.

This could be useful when applying for a new loan, be it a car loan, a personal loan or a mortgage.