Used responsibly, a credit card can be a very helpful financial tool. Making consistent, on-time payments can boost your credit rating, and some cards offer rewards for purchases or even a 0% interest rate for a short period of time on balances transferred from other credit cards.
However, if your credit spending gets out of control, monthly payments and accumulated interest can become a problem. Follow these credit card tips to help avoid common problems:
1. Pay Off Your Balance Every Month
Avoid paying interest on your credit card purchases by paying the full balance each billing cycle. Resist the temptation to spend more than you can pay for any given month, and you’ll enjoy the benefits of using a credit card without interest charges.
2. Use for Needs, Not Wants
A credit card should be used carefully. Frivolous purchases can lead to debt. Credit cards can be used in emergency situations, such as a mobile phone bill that’s due before your next payday. Use the credit card as a temporary loan to yourself, and then pay back the amount as soon as you can to decrease or avoid interest charges altogether.
3. Never Skip a Payment
Pay your bill every month, even if the minimum payment is all you can afford. Missing a payment could result in a late fee, penalty interest rates, and a negative impact on your credit score.
4. A Budgeting Tool
If you’re confident you can use a credit card responsibly and pay off the balance every month, try using it as a budgeting tool. By making all of your purchases with your credit card, you can see exactly how much you’ve spent at the end of the month. Of course, you should only do this if you know you can pay off the balance each month. To make sure your credit card spending doesn’t get out of hand, never charge more to your card than you have in your bank account.
5. Keep Track of Your Expenses
When you have no strict restrictions on how and when to spend money, it is easy to lose track of your spending. While it may not initially seem like a big deal, it can accumulate into an impending burden on your shoulders. To avoid hefty bills, staying mindful of your card usage is advisable. There are multiple ways to do so, including using budgeting apps and setting alerts for your spending.
6. Stay Under 30% of Your Total Credit Limit
One way to keep your credit score healthy is to keep your credit utilization ratio under 30%. This credit utilization ratio is the percentage of total available credit that you’re using.
7. Check Your Monthly Statements Carefully for Accuracy
Regularly checking your credit card statements is a great way to keep your spending top of mind. It can also help you spot transactions you don’t recognize. And that could help protect you from fraud.
You can set up instant purchase notifications in many mobile banking apps to receive an alert when a transaction is completed on your credit card that is greater than the amount you defined. These apps can also help protect your account by monitoring your transactions and reaching out when they spot something that seems out of the ordinary.
8. Take Advantage of Your Credit Card Rewards
If you have a rewards credit card, like a cash back card or travel credit card, consider ways to get the most out of it. That could mean finding one that matches your spending habits so you can maximize the benefits of your card. If your card has an annual fee, fully understanding the card’s perks and benefits can ensure the fee is worth it.
9. Avoid Paying Only Minimum Dues
Paying minimum dues is completely justified when facing a financial crunch. But making it a habit even when you have the capacity to pay back can backfire heavily. Because it incurs high interest charges over the period the bill is outstanding.
CONCLUSION
By following these smart credit card tips, you can enjoy the benefits of using credit cards while avoiding the pitfalls. Remember, the key to successful use of credit cards is responsible spending and regular monitoring of your finances.