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6 Credit Card Tips for Smart Users

A credit card, when used appropriately, may be a highly useful financial instrument. Making consistent, on-time payments may improve your credit score, and some cards provide rewards for purchases or even a 0% interest rate on balance transfers from other credit cards for a limited time.

Monthly payments and accrued interest might become an issue if your credit spending spirals out of control. To avoid frequent credit card issues, follow these guidelines:

1. Pay off your balance every month.

Paying the entire balance on your credit card purchases each billing cycle will save you money on interest. If you resist the urge to spend more than you can afford each month, you'll reap the benefits of not paying interest on your credit card.

2. Use the card for needs, not wants.

The usage of a credit card should be done with caution. Debt can be incurred as a result of impulsive purchases. Credit cards can be utilized in an emergency, such as when you have a phone bill due before your next payment. Use your credit card as a short-term loan to yourself, and then pay it off as soon as possible to reduce or eliminate interest costs.

3. Never skip a payment.

Even if the minimal payment is all you can afford, pay your account every month. A late charge, penalty interest rates, and a negative impact on your credit score may be incurred if you miss a payment.

4. Use the credit card as a budgeting tool.

Try using a credit card as a budgeting tool if you're certain you can use it properly and pay off the debt every month. You can see precisely how much you've spent at the end of the month if you make all of your transactions using your credit card. Of course, you should only do this if you are confident that you will be able to pay the debt off each month. Never charge more to your credit card than you have in your bank account to keep your credit card spending in check.

5. Use a rewards card.

It makes sense to use a card that gives rewards if you use a credit card for most or all of your transactions. You'll not only save money on interest, but you'll also receive incentives like cash, airline miles, or shop points.

6. Stay under 30% of your total credit limit.

Maintaining a credit usage ratio of less than 30% is one strategy to keep your credit score good. This credit usage ratio measures how much of your total available credit you're utilizing. If your limit is $1,000, for example, you should maintain your balance below $300. However, the ratio applies to the total of all your credit cards, so if one card has a $3,000 limit and a $3,000 balance, and another card has a $7,000 limit and no balance, you're right at the 30% level ($3,000 of a $10,000 possible limit), which is where you want to be.