Credit is an essential part of one’s personal finances. However, if you don’t use credit wisely, you are likely to be drowning in debt. Here are some tips & tricks on best credit practices.
Use Credit Wisely – Q&A
Before we get into the tips on how to use credit wisely, here are some useful Q&A about credit cards.
- How many credit cards is a reasonable amount to have? There is no “ideal” number of credit cards that one should own. Good credit is something that you build over time. It is largely associated with how you handle your credit: do you overspend or stay on budget? Therefore, it is important to ensure that you don’t fall into the trap of opening numerous accounts simply to raise your score.
- How can someone with poor credit rebuild their credit with a credit card? A secure credit card is the most basic means of rebuilding credit. They require a cash deposit and are commonly used to build credit. Therefore, a secured credit card combined with responsible financial behavior can help rebuild your credit history. If you make timely payments on your secured credit card, it is most likely a stepping stone to getting an unsecured credit card.
- What should you consider when choosing a credit card? When you are choosing a credit card, there are many features and kinds of cards to consider. These include fees, charges, interest rates, and benefits which can vary among credit card issuers. As a result, some credit cards that look like a great deal at first glance are not the best choice. They will lose their appeal once you read the terms and conditions of use, since you are likely to find negative factors when you calculate how the fees could affect your available credit.
Managing credit card debt is a financial priority for most of us. In order to do so, it is important to know how best to use credit wisely.
Use Credit Wisely – Tips & Tricks
- Do not use credit cards to finance an unaffordable lifestyle. Are you constantly using credit cards and are unable to pay the bill each month? Then you are probably using your cards to make an unreasonable budget work.
- Avoid using credit cards if you’re already in financial trouble. Finance charges and other fees can make getting rid of debt harder. Therefore, restrict the use of credit cards in difficult times to avoid even more difficult times.
- Don’t just pay the minimum payments. If you pay only the minimum, it will take a long time to pay off your debt. For example, if you owe $5,000 on an account with 18% APR, making 2% payments will take over 44 years to pay off. Also, you will have paid $12,431.00 in interest. Therefore, pay as much as you can, when you can, to avoid paying a high interest.
- Make your credit card payments on time. Avoid late fee and penalty rates if you can. Bad debt problems get worse fast when you have late fees and higher rates to pay. One credit card negotiation tactic that you can try calling your credit card company to ask for a waiver on the fee if you accidentally make a late payment.
- Beware of unsolicited increases to your credit limit. Don’t assume that this means that your lender thinks you can afford more credit. Lenders generally increase limits for consumers that they think will carry a bigger balance and pay more interest.
- Don’t max out your cards. It’s easy to get hit with over-limit fees. Staying far below your max can avoid this. Also, a credit card account close to its limit will cause a big drop in your credit score. Be aware of whether or not your account allows you to spend over your limit, as this is an optional feature.
To speak to a credit counselor today about credit card debt advice and managing your finances, call ACCC at 800-769-3571.