Credit cards can be a great financial tool if you use them properly. If you think credit cards are the root of all evil and are the cause of financial problems and unmanageable debt, the real problem may be bad money management habits. It’s time to develop new and better habits. Here are some of the habits of good credit card management.
Pay Back What You Borrow As Soon As You Can
Did you know that it’s not necessary to carry a balance on a credit card? It’s a much better habit to make a purchase with a credit card and pay it back the same month if you can. If you’re not able to pay the whole thing back in full, make sure you pay at least the minimum payment on time each month. Pay more than the minimum if you can and figure out when you can pay the whole thing off before using the card to make another major purchase.
Don’t Use Too Much of Your Available Credit
Avoid using anywhere near as much money as you have available. When your credit score is determined, one of the factors considered is your credit utilization, which is the percent of available credit that you’re using. Try not to use more than 30 percent of the available balance.
Track Your Spending
The total amount owed on a credit card shouldn’t surprise you. You should know what the balance represents. If you’ve lost track of what goes into the amount you owe, you’re using your credit card too much. Avoid overspending just to earn rewards.
Know the Terms of Your Credit Card Account
You may have had an introductory rate that was low or even 0 percent, but at some point, your rate will go up. Make sure you know what interest rate you’re being charged and whether you’re being charged an annual fee or any other type of fee.
Don’t Have Too Many Credit Cards
There’s no hard and fast rule about how many credit cards you should have, but keep in mind the more cards you have, the more likely you may lose track of at least one of them and forget to make a payment. You don’t need to rush to close accounts you’re not using, because closing them reduces your available credit and increases your credit utilization rate. Instead, lock up cards you’re not using in a file cabinet.
Watch Your Credit Report
Be proactive about keeping an eye on your credit report to make sure there haven’t been any reporting errors. Creditors are still human and sometimes make reporting errors. For example, they may report incorrect balances or may post a payment wrong and report you as paying late when you paid on time. Any errors you find should be disputed immediately.
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