If you’re reading this post as a follow up from last week’s post on how to choose the right credit card for you, congratulations on choosing a card. Now, it is important that you learn how to use it properly so you don’t get into trouble with it like many people do.
Credit cards make life more convenient, but not necessarily easier. If you choose to abuse the card by overusing it, they can become one of the biggest sources of stress in your life. However, if you use a credit card appropriately and responsible, you can reap benefits and use them to your advantage.
To use a credit card responsibly, you should…
- Always pay your bill on time. You should always strive to pay off your account in full each month, but if you can’t, make sure you pay the minimum on time.
- If you feel tempted to overspend, reduce your limit. This can be done easily and without penalty by simply calling your card issuer.
- Protect yourself against credit card fraud. If you’re worried about fraud, a crediting monitoring service may be worth looking into.
- Take advantage of any reward programs your card offers. This will vary depending on the card you chose.
- Pay off your full balance every month in order to avoid paying interest on the amount you owe.
- Always review your statements each month to ensure there are no unexpected charges.
To use a credit card responsibly, you should not…
- Use your card to make ends meet. A credit card is not ‘free money’. Whatever you spend, you have to pay back. If you have an occasional emergency, it is fine to use. But it shouldn’t be a monthly occurrence.
- Pick the first credit card you see. If you read last weeks post, you will know what should go into choosing your credit card to make sure it works for you and your financial situation.
- Make large purchases unless you can pay the full balance immediately. To avoid paying interest, if you are not able to pay your account off in full after a large purchase, you should consider saving more money before you buy it.
- Exceed 25-30% of your credit limit. Exceding this percentage can affect your credit score negatively. For example, if you have a $1000 limit, you should keep your balances to below $250-$300. If you are continuously exceeding the 25-30% (but are paying it off responsibly), you may want to consider a credit increase.
- Own more than five credit cards. There really isn’t a need if you’re being responsible with your payments each month.
- Use rewards programs as an excuse to spend more money than you were already planning to spend.
By following these simple tips, you should not have any problem spending (and paying off) on your credit card. Always be mindful with your purchases, and make sure you are paying the balance off in full each month.