If you know how to use credit cards the right way, they can be extremely valuable. But if you use them other than in the way they were intended, the consequences can be onerous. The chances are good that your neighbors and loved ones know a lot about the negative consequences of credit cards. That’s […]
If you know how to use credit cards the right way, they can be extremely valuable. But if you use them other than in the way they were intended, the consequences can be onerous. The chances are good that your neighbors and loved ones know a lot about the negative consequences of credit cards. That’s because the average person holds over $7,000 in credit card debt. When you factor in inflation, that figure increases exponentially. One study even shows that more than half of Americans make their purchases with credit. Unfortunately, not nearly as many people pay them off.
How to Start Using Credit Cards the Right Way
You don’t have to get rid of all your credit cards. However, forgoing credit card use could act as a good plan if you have abused them in the past. You can learn good credit card use without having to deal with the negative consequences. You can follow these tips to gain more of the benefits that credit card use can give you.
Always Pay Your Bill On Time
This is very important. Many credit card issuers can charge high fees for late payments. More than a third of your credit score is determined by your payment history. So late payments can really mess up your credit score.
To keep your interest rates low, pay your credit card bills on time. If you’re not exactly good at meeting your bill payment deadlines, set a reminder on your phone about a week before your due date. You could also set an automatic payment arrangement with your credit card issuer. Just make sure that the payment is available on the due date every month.
Don’t Think Of Your Credit Card As Part Of Your Income
Use your credit card as a complementary addition to your budget, not as a required part of your income. If you’re able to use credit cards responsibly, you can use them to make some purchases and use the rewards for protections that you can only get through credit use. Just make sure that you log into your account every so often. It can be difficult to really get a hold on your spending if you’re not working to keep track of your purchases.
Be Self Aware When It Comes To Your Credit Card Use
Some people have more trouble with credit than others. If you have trouble with responsible credit card use, ask your credit card issuer to lower your limit to an amount that you can pay off every single month. No credit card company will deny you this request. After all, they want their money back!
You could also use your credit card until you’ve spent a certain amount. When you get to that amount, put it away until you pay off your balance. This method will help you stay on budget and allow you to practice good credit usage until you feel safe enough for a larger credit card limit.
Check Your Credit Reports Every Single Year
Capital One suggests that everyone check their credit reports at least once every year. Doing this task helps you catch mistakes, fraudulent accounts, and other incorrect information.
You can get one credit report from the three main credit bureaus (Experian, TransUnion, and Experian) for free. There’s no reason not to request your credit reports. You can get your free credit reports once every 12 months.
Pay Attention To How You Pay Off Your Balances
Credit card issuers now have to show their customers how long it will take them to pay off their credit balances if they pay only their minimum payment every month. Credit card companies also have to tell their customers how long it will take to pay off the entire balance.
The finance company Fidelity states that paying the minimum balance on your cards will only make sense if you’re working on paying off higher interest credit card debt first. Fidelity also suggests that whatever you do, pay at least the minimum balance on all of your debts so that your credit score doesn’t suffer as a result.
Only Use Credit for Your Larger Purchases
Using your credit cards to pay for smaller purchases such as mid-week trips to the grocery store or to Starbucks can really add up if you’re not extremely careful. For this reason, you should only take out the credit card when you’re making large purchases. If there’s an expensive item or service you want to make, save up for it first. That way, you’ll have the money to pay off the purchase in full.
If you can’t save for a big purchase, make a plan to use your credit card and pay it on a very strict timeline. For example, if you purchase a television for $1,000, rearrange your budget so that you can make four $250 payments for your credit card bill. Just realize that you’ll pay a bit of interest. If you plan on choosing this option, do everything you can to make these payments on time. If you don’t, the interest can really get out of control.
Not every person came out of the womb wielding the attitudes of financial personalities Dave Ramsey, David Bach, or Suze Orman. There are average Joes and Janes who can use credit in a responsible manner. If you don’t do so already, you can learn to do so easily. Good credit card use mainly involves creating and sticking to a budget, not using your credit card for the daily latte, and making all credit card payments on time. If you do all these things, you can find that credit cards can make your life easier in a lot of ways.