Must Read Tips On How To Use Your Credit Card
How to make your credit card work for you
Credit cards are a great way to add convenience to your payment methods. But those conveniences come at a cost. With the following tips, you can avoid costly fees and interest.
- Keep track of your spending
- Pay your credit card on time
- Maximize your credit card payments
- Choose a sensible credit limit
- Don’t use credit to make ends meet
- Use store cards wisely
- Review your credit card statements
- Close your credit card properly
Keep track of your spending
Racking up a large balance on your credit card is much easier than you may think. If not careful, you can find that you have a balance that’s much higher than you can afford to pay.
The best way to keep track of your spending is to use an app like Mint to help you manage your expenses against your budget. The next thing to do is make sure you routinely check your monthly credit card statement.
Pay your credit card on time
When you receive your credit card statement, check the date the payment is due, and prioritize that payment. It will help you prevent extra interest fees and hefty late payment fees and penalties.
You may want to remove the stress of remembering your payments by setting up a direct payment from your bank account. You can set it to come out once a month, or more frequently. Just make sure you’re making at least the minimum monthly payment.
Maximize your credit card payments
If you choose to only make the minimum monthly payments, you will pay significantly more interest on your purchases, and paying off your credit card could take years.
If making the minimum monthly payment is a struggle, consider performing a balance transfer to a card with a lower interest rate, and pay off more when possible. If you do switch to another, lower interest card, make sure to properly close your card and account so you don’t end up with more debt. Find out more about credit card balance transfers.
Choose a sensible credit limit
Your credit card limit should be an amount that you personally know you can pay back, as well as a limit that doesn’t tempt you to overspend.
Reducing your credit limit
If you currently have a card with a limit that tempts you to spend more than you’re capable of repaying, contact your creditor and ask to reduce your credit limit. You can call or visit a branch in person to make this request.
Smart Tip
If you can’t afford to pay off your balance in full each month, don’t increase your credit limit. A higher credit limit makes it all too easy to accumulate more debt.
Invitations to increase your credit limit
Creditors aren’t allowed to invite you to increase your credit limit, even if you have opted to do so in the past. However, you can request an increase in your limit at any time.
If you need to increase your limit to make a particular purchase, set a goal to pay off the debt quickly, and then plan to lower your limit back to a more practical amount for your current budget.
Don’t use credit to make ends meet
Emergencies happen. Sometimes you may just be running low on cash between paydays. But using credit or taking cash advances from your credit card will not benefit you in the long run. It may help you immediately, but you’ll find you accumulated more debt in the process.
Our page that discusses building an emergency fund provides tips to build up a buffer with savings to help you get through the rainy days, without having to rely on your credit card.
We also provide guidance for circumstances that may make it hard to pay on debts and other types of bills:
To get affordable- sometimes, free- help with your debt, check your local initiatives to see if there are programs with financial counselors to help you manage your debts.
Use store cards wisely
If you regularly shop at a particular retailer, it can be tempting to get one of their store cards. You may even earn rewards points with these cards, get special cardholder discounts, or other exclusive offers. But before you sign up for store cards, make sure you consider the annual fees, service fees, and interest rates.
Carefully review the terms and conditions of the agreement, and compare them against the savings you’re supposed to earn with the card. Learn more about credit contracts here.
Review your credit card statement
Keep all of your credit card receipts each month, and compare them to your credit card statement. This will help you ensure that you have been charged the appropriate amounts with your purchases, and easily detect any indicators of fraud.
Even if you don’t save your receipts, there are some things you should check for on your statements, regardless:
- Charges you don’t recognize
- Larger or unusual charges
- Changes in direct pay accounts
- Duplicate charges
If you find any transactions you didn’t make yourself, contact your creditor or bank immediately so you increase the likelihood of reversing the transaction. See unauthorized and mistaken transactions for more information.
Close your credit card properly
Cutting up your credit card is only one step in the process of closing a credit card account. Visit our how to cancel a credit card section to find out how to properly close out your credit card account.
Take charge of your credit card and make sure you only pay for purchases that you authorized.
