Whether you’re getting a credit card for the first time or you want to shape up and start using them correctly, you may be wondering what the best practices are for using a credit card. And that’s great, because too many people are lax about their credit card use and don’t bother to learn the ins and outs about them!
The result is that many end up in credit card debt from poor financial management – don’t let that be you. Here’s what you need to know about signing up and using a credit card.
Get Debt Help Right Away
If you’re reading this because you’ve already made mistakes and are now in debt, then it’s time to get help straight away. While these best practices will definitely help you going forward, they may not be effective for the damage already done.
Choosing a credit counsellor can be daunting, but if you go with a not-for-profit agency that has your best interests in mind, then they can help put you on the right path towards a debt-free life.
Choose Your Card Wisely
If you haven’t committed to a credit card yet then make sure you look for one that offers low annual fees and low interest rates. Shop around first and always read your agreement thoroughly before signing anything – and if you have any questions, be sure to ask!
Use Your Card Wisely
Wanting to build credit is great, but that doesn’t mean you should be spending money you don’t have. Only use your card for purchases if you have the money already to pay it off.
Set up a reminder if you need to – always make monthly, on-time payments, and pay as much as you can (even if that means only paying the minimum). Failure to do so will result in charges to your card.
Pay it Off Entirely
While the ideal is to never have outstanding charges on your card, if you do, it’s important that you pay it off as soon as you can. Don’t let it sit around and collect interest – that’s money wasted that could have been avoided.
Stay Within Your Limit
If you go over your credit card limit you will incur fees and damage your credit rating. The best way to build credit is to keep your balance below 70% at all times – this shows lenders that you can control your spending, and it’s also beneficial to you in the case of an emergency.
Don’t Use Cash Advances
Unless it’s an emergency, never use cash advances. The interest rates for these advances are typically much higher than usual, and most of the time they will start to apply immediately. This can seriously hinder your financial situation especially if you’re already in a bad place.
Use a Budget Tracking Tool
Budgeting is a great way to make sure you don’t abuse your credit card. There are plenty of apps and online tools that you can use that will let you enter in your income, expenses, etc., and help you track your spending and manage your monthly finances.
By using these best practices, you’ll be sure to keep your credit card usage in check and avoid falling into unnecessary debt!