It is hard to go a day without being bombarded by offers from credit card companies. Mail offers are sent out with bolded statements such as “pre-approved,” “low-interest,” and other enticing phrases to lure customers in. Although credit cards definitely have their time and place, using credit cards unwisely can lead to the quick accrual of overwhelming debt. By using your credit cards smartly, you can keep your credit under control, build up a good credit rating, and have the convenience of a credit card when needed. These are some rules to follow for intelligent credit card use.
Rule 1: Pay Your Monthly Balance
Always pay your monthly balance by the deadline in full. This will boost your credit score and prevent you from having to pay bank and interest fees. If you don’t think that you will be able to pay off a particular purchase, unless absolute necessary, consider holding off. Credit cards are known for having some of the highest interest rates of any loans; sometimes up to 20%. This means that when you pay off only the minimum amount due, you quickly end up accruing additional interest fees. If you are experiencing difficult financial times, at the very least pay off your minimum balance by the deadline. Late credit card payments can negatively affect your credit rating or cause the bank to increase your interest rates.
Rule 2: Set a Reasonable Limit
Your bank will always want to set your credit card limit as high as possible. Although it might sound appealing to suddenly have thousands of dollars available to spend, remember that whatever your spend on your credit card your will ultimately have to pay back. Start out will a lower credit limit that allows for emergencies but that you can’t get into too much debt with. Remember, if you need to you can always increase you limit but it is harder to pay off the debt.
Rule 3: Make Smart Purchasing Choices
Although it may feel easier to just swipe a card instead of paying with cash, getting into the habit of using your credit card for everyday purchases such as groceries, gas and other daily life expenses can quickly lead to racking up more debt than you realize. Always keep a close on what you are purchasing with your card, how much it cost and how you are going to pay it off.
As a last rule of thumb, make sure you use a credit card comparison tool before deciding on a credit card. Making rash decisions can have a negative impact on your choice!
Definitely pay your monthly balance! Carrying a balance is not good for your credit score, or with having to pay interest on that.
Some people can lose track of their activity if they are using a credit card. Making smart purchases is especially important if you’re using a credit card.
I always, always always pay my card off by the end of each month. It works out great because I can reap the reward of the card without being charged interest. I try to put everything on my card and then pay it back at the end of the week.
I often ask for a lower limit just because I don’t want all that potential debt available to me. It’s weird because I’ve never really been tempted to go crazy, but it just bugs me to that that out there like a time bomb.
I have a credit card, but I don’t use it for every day purchases. I don’t feel like I’m disciplined enough yet with my spending to keep things in line enough to pay it off every month. Some day I plan on doing that though, and at that point I’ll get a rewards card to take advantage of the points.
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