Using a credit card wisely can help you strengthen your financial situation. However, it’s also easy to overspend when you have a credit card. Here are some important tips that will help you avoid the common problems associated with credit card usage.
Repay Your Balance Every Month
It’s important to try not to carry a balance on your card since you get charged interest on this balance. But, what’s perhaps more important, is that you make your payments every month. Even if you can’t afford to pay off your entire balance, ensure that you at least make the minimum payment.
Use Your Card With Caution
Don’t go around swiping your credit card for frivolous purchases just because you have a large spending limit. Habits like this could lead you to debt. Ensure that you use your credit card only for essential payments and emergencies.
Get A Rewards Card
If you do utilize your card a lot, you may be able to benefit further by getting a credit card that offers you rewards in the form of miles, points, or cashback when you charge expenses to your card.
Keep Your Credit Utilization Low
Although you may be paying off your credit card bill every month, your credit score could get negatively affected if your credit utilization increases. To avoid this, it’s a good idea to keep your balance well under your approved limit. Most experts recommend that you keep your credit utilization ratio below 30%.
Look for A Balance Transfer Credit Card
If you need to make big-ticket purchases with your card, you may want to get a balance transfer credit card that has a 0% APR for a promotional period. This can help you clear your balance without having to pay the interest.
When you use your card responsibly and track your payments month after month, you’ll find that your card can serve as a budgeting tool. By making all essential payments with your credit card, you’ll know what you tend to spend the most amount of money on and if you need to change your spending habits. Keep in mind never to charge more expenses to your card than what you can pay off.