Responsible Credit Card Use Dos and Don’ts

Credit cards can help your credit rating or completely ruin it. For 9.1% of Americans who are at least 90 days in arrears on payments, their credit card use is hurting them.

Learning how to use your credit cards to your advantage is for everyone. Even if you’ve had credit for many years, expanding your knowledge on managing credit is beneficial.

If you want to recover from bad credit or avoid the need to fix your credit, keep reading.

The Basics of Good Credit Card Use

There are some basic things you can do that are always under your control to manage your credit. If you keep these few things in mind, you’ll see your credit rating increase over time.

1. Pay on Time

Make paying your credit cards on time a priority. Try to make it easy for yourself by putting the due date on a calendar or setting a reminder on your phone. You can make it even simpler by setting up automatic payments through your bank.

If paying for your credit cards is easy and stress free, you’ll never have problems making the payments. You can simplify your credit card use by including payments in your monthly budget.

Sometimes, mistakes happen though. If you catch it before the close of the next billing cycle, it won’t affect your credit. You may have to pay a penalty or late fees though. Some credit card companies will forgive fees if you contact them immediately.

If you have come upon an emergency, instead of hoping you can get it together in time, contact your credit card supplier. They may be able to offer some assistance for a period of time.

2. Keep the Balance of Credit Cards Low

There are two ways you can ensure that your credit card balance is kept to a minimum. You can use it only for emergencies and pay it off as quickly as possible or you can use it for daily purchases and make payments on your card every week.

If you choose to use your credit card for everyday spending, you can build up a good credit history fast. This is a good option for credit cards that allow you to earn rewards. Set a time to look at your spending and pay it off.

Managing credit takes time and effort. If you choose to use your credit card for daily purchases, you should track your use often. Once a month is too little but once a week is easier to manage.

You should only use your credit card for large purchases if you know that you can budget to pay down a substantial amount each month. Remember that the longer you owe on your credit card, the more you will be paying in interest.

3. Make More Than Minimum Payments

A minimum payment is better than no payment if you’re close to the due date. If you make only minimum payments on your credit card, you will pay a lot in interest fees. 

If you are managing credit, you should find out your credit utilization ratio. This compares the amount of credit you have to the amount you have used. Aim for 30% or less.

If you have a $5000 credit limit, try to keep your balance to $1500 or less. This will help you avoid damage to your credit use.

Understand the Fine Print

Understanding the fine print of credit card terms of service is challenging. If you have a hard time with this, get help with breaking it down into simpler terms. A friend may be able to help or you can talk to someone at your bank.

Some of the things you should look at include the annual percentage rate (APR), penalties, and fees. All of these things can affect how much it costs you to use your credit cards.

What if You Need Credit Repair Now?

If you have come across this information too late and you need to recover from bad credit, don’t panic. You can fix your credit rating by implementing a few habits and changing the way you are managing credit cards.

First you need to know what your credit score is. There are many sites online that will let you check your credit score as often as you want for free. Your credit score is a number between 300 and 850.

Your goal is to get your credit score to 700 or higher. If you’re not there yet, follow these tips to get it higher.

1. Examine your credit card use

How often do you use your credit card? What are you using it for? What is the value of your purchases?

Once you examine how you are using your credit card, you may be amazed to see how many impulse purchases you are making. Multiple small impulse purchases add up fast.

You may need to put your credit cards on freeze. Take your credit card numbers out of the memory of your computer. Don’t carry your cards around with you.

2. Set Up a Payment Plan

Look at your budget and decide on the maximum amount that you can put on your credit cards each month. If you have more than one credit card, pay off the one with the highest interest rate first.

Once you know how much you can afford to pay each month, set up an automatic payment plan with your bank. Put the date of the payments on your phone for a reminder.

3. Avoid Hard Inquiries

Hard inquiries occur when you apply for any form of credit. This evaluation will appear on your credit report and can affect your credit score.

The more loans you try to get, the higher your credit risk. This can affect your credit by as much as 10%.

If You Still Need Help Managing Credit, Go to the Professionals

You may still be struggling with credit card use, even after trying to implement all the above tips. Credit counseling and debt consolidation are two options that may help you get back on track.

Look for legitimate agencies. If a business promises that they can help fix your credit in a short period of time or “easily”, back away.

Never pay anyone for credit repair without checking with the Better Business Bureau or the list of approved credit counseling agencies from the U.S. Department of Justice.

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