Transferring your balances to avoid paying your credit card bill. Maxing out your card. Making minimum only credit card payments. These are all bad ways to use your credit card. Not using your credit card the right way is expensive, damaging to your credit score, and can lead to credit card debt. You may be reckless with your credit card because you don’t realize how to use it responsibly. In any case, here are nine smart ways to use your credit card.
1. Pay the balance in full.
If you pay off your balance completely every month, you avoid the finance charges that can make having a credit card unnecessarily expensive. Not only that, if you keep a $0 balance, you eliminate the risk of running into credit card debt. Keeping your credit card purchases at an affordable level will make it easier to pay your balance in full each month.
2. Make your credit card payments on time.
Three things happen when you make a late credit card payment. First, you get charged a late fee. Depending on your card issuer and your credit card balance, your late fee can be as much as $39. Second, your credit card interest rate could increase. Starting February 22, 2010, you won’t get an interest rate increase for a 30-day late payment, but you will for a 60-day late payment. Finally, a late payment added to your credit report and remains there for seven years. Late payments hurt your credit score and you ability to get credit cards and loan in the future.
3. Don’t charge a high balance.
There are two things wrong with running up a high credit card balance. First, it hurts your credit score because 30% of your credit score considers how much of your available credit is being used. A bad credit card leads to higher interest rates and even having some credit-based applications denied.
The second reason you shouldn’t have a high credit card balance is because it’s more difficult to repay. When you keep your balances low, it’s easier to pay them off, leaving you with no debt to worry about.
4. Don’t loan it.
Family and friends might ask to borrow your credit card and the best answer is “No.” Whenever your credit card leaves your possession, you have no control over what happens to it. The person borrowing your credit card could rack up a high credit card balance. Or, they may not be as careful with your credit card as you would be and it can be lost or stolen.
5. Use it or lose it.
If you want to keep your credit card, use it from time to time. One credit card issuer has been known to charge an inactivity fee when you don’t use your credit card within a certain period of time. That’s actually nicer than what most other credit card issuers do, which is close your credit card account. To you’re your credit card open, charge something on it periodically and repay the balance when the statement comes.
6. Keep it in a safe place.
Unfortunately, there are people out there who would love to get their hands on your credit card. Even your credit card number would be a credit card thief’s dream-come-true. Keep your credit card in a safe place where it can’t be stolen easily. When you’re out in public, don’t leave it out in the open, because a thief even take a picture of your card or even memorize your credit card number.
7. Monitor your billing statement and inserts.
Make sure you read your credit card billing statements completely and report any suspicious activity to your credit card company. Since credit card companies include important announcements with your billing statement, it’s important that you read everything in the envelope with your billing statement.
8. Leave it open.
When it comes to your credit score, there’s nothing to be gained by closing a credit card account, especially one that still has a balance. In fact, closing a credit card is more likely to hurt your credit score than to help it.
If you want to reject your credit card issuer’s changes to your credit card terms, you may have to suffer through a temporary blow to your credit score. That’s because you have to close your credit card account to reject the change in terms. Fortunately, your credit score will recover as you pay off your credit card balance.
9. Let your kids see you pay the bill.
Children can easily believe credit cards are magic money since they never see what goes on behind the scenes. When your child is old enough to understand, let him or her watch you pay your credit card bill. Explain that the payment you’re sending to the credit card company comes from your paycheck and takes away from the money you have to spend on other things. You may use cash to help explain what’s going on.
Using your credit card the right way lowers the overall cost of using a credit card. It builds your credit score and keeps you out of credit card debt. There are better reasons than those to use your credit card the smart way.
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