Today there are many options when it comes to credit cards. If you have good credit, it’s simple to get approved for a card with good interest rates and a variety of perks. Used correctly, credit can help you build an even better score. However, if you do not use credit cards responsibly, you could be harming your financial future. and any perks you get in the process won’t be of much value.
Many people think that as long as they are paying the minimum payment on time each month, they are being responsible. There’s more to it than that — to use credit cards responsibly, you need to pay attention to more than just the minimum monthly payment.
Here are five tips to help you truly use credit cards responsibly
- Don’t charge more than you can pay each month: Be careful not to make the mistake of charging more than you can pay each month when the credit card bill comes. Check the balance on your card, and make sure that you do not exceed the amount that you can pay off in full. This will usually prevent interest from being charged, which will not only save you hundreds of dollars each year, but will often help to improve your credit score as well.
- Monitor your balances closely: The golden rule of credit cards, as they pertain to your credit rating, is to never allow your balance to exceed 30% of the credit available on the card. For example, if your balance is $5,000, you should never allow the balance to exceed $1,500. Carrying high balances can cause your credut score to drop, and some credit card issuers could flag your account as a default risk. The only time you should ever break the 30% rule is when there’s a true emergency, and then you should work to pay that balance down as quickly as possible.
- Don’t use your credit card for everyday purchases: Credit cards are best used for online purchases, large purchases, airline tickets, rental cars, hotels, monthly subscriptions, and things of this nature. They should not be used for things such as groceries, rent, utility payments, clothing purchases, or restaurant meals unless you are disciplined to use it only for the convenience or to collect reward points and then pay it off each month. If you aren’t in the habit of paying your full balance off, or if you struggle with budgeting and tracking your expenses, it’s wise to avoid getting into the habit of using your credit card for small everyday purchases.
- Become better acquainted with your credit cards: Often, credit card holders know little or nothing about the cards that they use. You should know the interest rate that is being charged, including the rate for cash withdrawals and balance transfers as these often are subject to a different interest rate. You also should be aware of any late fees or annual fees your card charges. Additionally, it’s smart to educate yourself about any rewards or perks available with your cards, including cash-back opportunities, points, what the points can be used for, and the types of purchases that are eligible for the perks or rewards that are offered.
- Communicate promptly with the issuer of your credit cards: If your payment may be late for any reason, contact the customer service department of your credit card issuer immediately to let them know. You should also contact customer service if there are any charges or fees on your statement that you do not understand. Remember that they are there to serve you and to help you with any problems or concerns related to your credit card. You can also contact customer service to ensure that you are taking advantage of all of the benefits available to you.
It’s not hard to use credit cards responsibly, but it does require organization, self-control and self-discipline. By using credit cards wisely, you will not only keep your debt under control, but you may also find that your credit scores improve. Responsible use of your credit cards always pays off in the end!
Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today!