If you use a credit card properly, it can be an amazing tool. When credit is used irresponsibly, however, it can become your worst nightmare. You can adopt a few simple habits to help you enjoy the benefits of credit cards, without facing the dangerous downsides. You can use the following tips to make credit card your best friends.
How to Use a Credit Card to Your Advantage
Many people carry large amounts of credit card debt and the average amount of debt is growing each year. If you are one of those that carry a large balance on your credit card, be cautious about adding even more debt. Below are some tips on how to best use a credit card.
Pay Your Bill in Full Every Month
To stay out of credit card debt entirely, you need to charge only those things that you can afford and to pay the bills in full every month. Doing so may seem to be a difficult task, but it is the number one rule of using credit cards wisely. It is a sure way to avoid getting into credit card debt and the only way to avoid having to pay the interest rate on purchases.
Never Pay the Bills Late
Besides paying your bills in full, you should also pay the bills on time. Most credit card issuers charge late payment fees. Since 35% of your credit score is based on your credit history, making a payment late can lower your credit score a lot. Over time, paying your bills in full and in a timely fashion can help you improve your overall credit score and avoid late fees.
Log into Your Account
Credit cards are easier than cash because they create a paper trail for you, even if you do not keep receipts. You can simply log into your online account to keep track of your spending. Checking your account often will help you stay on top of your spending, and help you to not overspend. Going through your account can also help you identify any fraudulent charges.
Use Your Credit Card as a Compliment to Your Budget
For this strategy to work, first determine a budget, then when you use your credit card for a purchase you can work it into your predetermined spending limits. In addition, if you pay the full balance each month, and stay within your budget, gaining rewards for making purchases is a great bonus.
Know Your Limits
If you think that you will overspend, then you should ask your credit card company to lower your credit limit, or apply a self-imposed limit. Once the limit is reached, you should put away your card until the next month starts or till you have paid your bills.
Choose Cards with Extra Perks
Try to choose a credit card that offers you benefits like free travel insurance, rental car coverage, etc. This will help give you extra incentive to use your card wisely, because you can't cash in on your rewards if you are delinquent on your payments.
Credit cards should be used cautiously to avoid unnecessary credit card debt. The best way to utilize your credit card and to avoid falling into debt is to follow a few simple steps, and you can get the best use of the credit cards you own.