A credit card can be a great financial tool for handling unexpected expenses and major purchases. It can also cause a lot of stress and possibly credit problems if it’s not handled the right way. Let’s look at some credit card best practices for keeping your credit in good shape.
Pay on Time
The most important thing to do to handle a credit card account responsibly is to pay your bill on time. Each month, pay back as much as you can, but at the very least, pay the minimum payment by the due date. A single payment paid 30 days late shows up on your credit report and can damage your credit and your buying power for seven years.
Pay Back What You Borrow Each Month
You can avoid getting over your head in credit card debt by paying back what you owe promptly. If you’re able to pay the balance in full each month, you may be able to avoid paying interest completely. If you’re not able to pay the full balance, make a plan on how you’re going to pay it back before you charge anything else. Making extra payments each month can bring the balance down more quickly and help you save money on interest.
Keep Credit Utilization Low
If you do carry a balance on your credit card, keep your credit utilization low. This refers to the percent of available credit that you’re using and is a big factor in how your credit score is calculated. A credit card best practice is to keep your balance under 30 percent of the full line amount. Avoid using a credit card for more than you can afford to pay back.
Pay Attention to Interest Charges
When you apply for a credit card, make sure you know the interest rate that you’ll be paying on any balance you carry. Retail stores often charge high-interest rates for store cards, and other credit card companies may charge a high-interest rate to consumers with poor credit or no credit.
Know What You Owe
You should know approximately how much you owe to a credit card company and what it represents. If you don’t know what your balance represents, you’re using your credit card too much. When you have a good idea of what your balance should be, you’ll know right away if the credit card company is reporting an incorrect balance to the credit bureau or if someone may have fraudulently used your card.
Watch Your Credit Report
Check your credit reports at least annually to make sure your accounts are being reported correctly to the credit bureau. Dispute any errors you find on your credit report right away with the credit bureau reporting it and with the creditor who may have provided incorrect information.
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