Whether your credit is extremely good or extremely bad or somewhere in between, it’s really easy to fall into the habit of using your credit cards irresponsibly… whether it’s that shopping spree you just couldn’t resist or that cash crunch you’re trying to avoid, irresponsible use of your credit cards can really get out of control if you’re not careful. And those bills can be difficult, if not nearly impossible to pay off, and it really hurt your credit score in the long run. So, it pays to be smart when it comes to credit and credit cards.
- Plan ahead when you’re going to use a credit card. What will you use the card for? How much will you allow yourself to charge? And, more importantly, what time frame will it take to pay the balance off? Purchases made with a credit card should be carefully considered… Are you buying a new television? New tires? A new fall wardrobe? If you’re using the card to buy something that’s on sale, will the interest charged against the purchase ultimately cost more than if you’d waited and purchased the item with cash instead, even if you have to pay full price?
- Unless you’re using your credit card to earn rewards and paying the card off every month, don’t use your credit card for everyday purchases like food, gasoline, utility bills, or entertainment. Not only will you be paying on the card long after you’ve used up the consumable goods, but you’ll be paying interest, too! See if you can’t cut a few corners elsewhere in your budget so you aren’t forced to use a credit card for everyday purchases.
- Avoid cash advances unless you have no other option! Cash advances usually come with a transaction fee (2-4% of the advance or a flat fee, depending on the card) and have a much higher interest rate than regular credit card purchases. That means you’ll have extra charges that will take a lot longer to pay off.
- Always try to pay more than the minimum payment due on the credit card. Remember, every dollar that you can pay off saves you money! Interest charges over the life of a credit card balance can be astronomical. Have you ever paid attention to the section on your statement that shows how long it will take to pay off the balance if you only make the minimum payment? And how much the interest will amount to? Wow! It normally take YEARS to pay off even a few hundred dollars. Do yourself a favor and pay as much as you can every month and get that bill paid off!
- And, speaking of payments, always allow plenty of time for your payment to clear… One of the biggest mistakes you can make is waiting until the last minute to pay your bill, only to discover that the site is “down for maintenance” or that it can take up to three days for your payment to post and your payment is due now. Waiting until the last minute is a risk you can’t afford to take – just one late payment showing up on your credit report can cost you lots of points on your credit score and you may even find your interest rates rising on other credit cards and loans… all because you waited too long to make your payment!
Remember, the goal with credit is to have it available, but don’t misuse it! Credit reporting is much more sophisticated these days… they don’t just look at whether or not you have credit and pay your bills! There are lots of factors that are taken into consideration, including evidence of responsible usage. Make sure you use your credit wisely!