Make no mistake about it, a credit card is a powerful tool. But with great power comes great responsibility. If that advice is good enough for Spiderman, then I figure it’s good enough for our readers. Like any power, credit can be used for both good and evil. The good is making purchases you need, paying off your balance quickly, and building up a positive credit history. The evil is spending up to and beyond your credit limit, missing payments, carrying large amounts of debt, and generally hurting your credit report. Learn how to use credit responsibly to stay on the right track.
How to Use Credit Responsibly
Don’t exceed your credit limit
Spending up to or exceeding your credit limit tells lenders and creditors that you rely very heavily on credit cards, and are most likely unable to repay your debts. The way you use credit is reported on your credit report. Information like this will hurt your credit score and your chances of obtaining other lines of credit in the future. That’s why it’s important to learn how to use credit responsibly.
Pay your bill on time
Late or missed payments are another bad sign on your credit report. Even if you have the money to make the payment, being late shows a lack of responsibility, and thus a higher risk for lenders.
Treat your credit card like cash
If you treat your credit card like cash, then you will never find yourself deep in credit card debt. Only charge amounts that you can afford to pay off quickly.
Pay more than the minimum
Carrying a balance on your credit card is what costs you money. Interest accrues each month as a fee for borrowing the money. The longer you carry a balance, the more interest you will wind up having to pay. By paying more than the minimum payment required, you are putting more money towards the actual debt and not the interest. You will pay off your debt faster, and it will cost you less if you pay as much as you can.
Don’t obtain credit cards you don’t need
Opening multiple cards in a short period of time can have a negative effect on your credit. Don’t be tempted by all the offers that come in the mail with fancy offers and upgrades. Most of these extras – fraud protection plans, credit record protection, travel clubs, life insurance, etc – are often bad deals.
In the end, your credit card should be used as a tool to maintain a good credit history rather than a crutch to live a lifestyle you can’t support. If you follow these tips, you will be able to avoid racking up credit card debt.
If you find yourself with too much credit card debt, there are options for you. To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.