3 Basic Tips on How to Use Credit Cards
We all love spending money on credit cards, but hate having to pay our bill. Responsible use of cards is a great way to help your credit score. Here are 3 tips for you to follow in order to use your credit cards more responsibly.
1. Do not carry a balance
Dealing with credit cards is nice as long as you pay them off every month. When you do so you can avoid interest and improve your credit.
There is a misconception that carrying a revolving card balance is good for your credit score. This is not necessarily a smart decision considering that you will pay interest every month. The availability of revolving balance means that you use up more available credit which lenders don’t look at very fondly. If you have an emergency or have a big purchase, make sure that you know exactly how much will be taken off your balance every month. Your usage should be low enough to cover the entire balance during each payment period.
2. How to choose your rewards wisely
Credit cards can help you get certain rewards and bonus points. You can save some money on purchases or even get cash back. On the other hand, if you care too much about earning points it may lead to spending too much. You need to be careful in this case when shopping.
A good solution to this issue is to search for a card that suits your shopping habits. In this case, you need to be careful, make sure that you understand what you are signing and getting into.
For example, buying a trip with a credit card to gain extra points is not the best way to go on a trip, especially if you can’t pay your debt every month. The only way to turn this into a bargain is to use your card every month to avoid interest and get bonus points, which then you can spend on travel without having to add your cash.
3. Do not spend more than you can afford
There is one issue we often forget about when we spend money using our credit cards - How much we can actually spend. When you spend more than you can afford you can leave carrying which means you’re paying interest.
If you use the card incorrectly it may start pulling you down, along with your credit history. Therefore, if you know your limits, using a credit card can help you.
So, don't fall in a trap. Try to use a credit card with a low limit which will not let you get into too much debt. These days, using a card for day-to-day spending is common and it’s easy to spend more than you can afford. If you have a limit you won’t be able to do so.
Credit Cards can be a dangerous tool if you are someone who’s recovering from bad credit. The more you improve it, the more you’ll want to borrow. If you borrow too much, interest payments can lower your balance again. So, try to be careful and use credit cards responsibly.
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