Credit cards sometimes get a bad rap. Some people think they’re all about living above your means, carrying debt you can’t afford and having zero financial responsibility.
Others, of course, are smart about their cards, leveraging their credit to open more doors and explore more opportunities.
Credit cards can be invaluable, a very helpful tool for expanding your life. Here’s several tips for making the most of your credit cards – 7 ways to use them responsibly while avoiding expensive, reckless behavior.
1. Pay your full balance every month
While you’re only required to make a minimum payment on your credit card every month, most credit card companies will be charging you interest for the leftover balance at the end of the billing cycle. Interest charges are where so many credit cardholders get into trouble.
Credit cards have notoriously high interest rates, and these charges can pile up quickly. The best way to avoid them is to only use your card for transactions you can pay off by the end of your billing cycle.
2. Pay your bill on time. Every time.
Did you know late fees can be as as high as $39? Paying your bill on time every month helps avoid these extra expensive costs.
Not only are you avoiding fees by being punctual, but on-time payments help improve your credit score too! Paying on time is a great way to keep and hold onto a healthy credit score, leading to lower interest rates, higher credit lines and other perks!
3. Stay informed
“Out of sight, out of mind” is one of the most dangerous mindsets you can have when it comes to credit cards. If you aren’t staying informed on your spending and your balance, it can get out of hand really quickly. To avoid this, check your balance often.
Most banks have easy-to-use mobile apps that make it super convenient to keep tabs on your account. Make checking your credit card account part of your daily cellphone routine. Knowing where your balance stands before you go out to spend money will help keep your card use in check
4. Use your credit card in your budget
This tip takes some discipline. If you’re a strict budgeter, you can plan to use your credit card for specific purchases that earn extra perks. Many credit cards offer cash back or rewards on certain purchases that you’re likely to make regularly, like groceries, gasoline or eating out.
If you’re diligent about this approach, you can use your card for spending that’s in your budget and earn money on purchases you planned to make anyway!
5. Be honest with yourself
You know your spending habits better than anyone. If you know you’ll overspend when you carry a credit card, leave it at home. Take temptation out of the equation instead of letting it ruin your financial life.
You can also call your credit card company and request a lower credit limit on your card. If you choose to do this, just keep an eye on your credit utilization. Remember that your utilization should never reach past 30%. When you lower your credit limit, you might use more of your total available credit and see your utilization ratio go up!
6. Pick and choose which purchases belong on a credit card
Many people think that big-ticket items are what get you into trouble with credit cards. However, many people end up racking up a high balance just by making numerous smaller purchases. Their credit card balance gets too high before they realize it.
But credit cards are still a smart way to handle big purchases. The best way to do this is to save for your purchase first. Then use your credit card to pay for the item. If you have a card with cashback or other rewards, you can win the perks while using your savings to pay off the balance!
For bigger purchases, you can also create your own “payment plan” and pay off the charge over a specific timeline. This approach takes more discipline, and you should figure out how much interest you’ll pay. The key to success here is sticking to your payoff plan.
7. Know your card’s terms
One of the easiest ways to get surprised by your credit card is by not knowing their terms and conditions. Take the time to understand the details of your card, including the APR, due dates, fees, grace periods and any perks of the card as well.
It’s best to look through these details before you open your credit card so you can choose a card that works best for you. For existing cards, do a quick refresh and review the terms, so you can set yourself up for success.
Credit cards can take a lot of self-discipline. But using credit cards wisely can be empowering. Take control of your credit, instead of letting your credit control you!