Contrary to popular belief, your credit card can be a powerful financial tool that helps you establish and maintain good credit and build wealth over time. However, if you’re not careful, credit cards can also lead to increased debt, negatively impacting your credit score and future borrowing power. It pays to know how to manage your card wisely, from emergency funds to cashback and airline miles. These ten tips will help you use your credit card responsibly, without breaking the bank or your budget along the way.
1) Keep Up With Your Bill
One of the worst things you can do is forget about your bill. Make sure that your debt doesn’t grow out of control and go delinquent on payments. Set up automated alerts or reminders with your bank so you are notified when a payment is due. Also, you can contact your credit card company to help manage costs and lower interest rates if you have fallen behind. The sooner you take action, the less likely it will be for an account to become seriously delinquent; if possible, start making small payments toward your debt each month until it’s paid off completely.
2) Set Limits And Enforce Them
We often underestimate how we can overspend on our credit cards, so it’s a good idea to set limits for yourself. Ensure your credit card statements come with alerts that tell you when you’re approaching or have surpassed your limit. If there’s a big purchase you want to make and you know it will exceed your limit, transfer money from another account beforehand. You can even set up some alerts via email or text message; a little awareness can go a long way in helping you stick to your limits.
3) Pay Off In Full Each Month
Interest charges on credit cards can quickly add up, and if you’re not careful, they can end up costing a lot more than whatever you spent at that time. Even if it seems like an insignificant amount, paying off your balance in full each month will help you avoid interest charges altogether and lower your overall debt load over time. If you don’t have enough money to cover all of your charges at once, try using an app like Mint or Personal Capital that helps keep track of where all of your money is going so you can better manage which bills get paid when. They’ll also remind you when your payments are due, so there’s no risk of missing any deadlines.
4) Know Your Interest Rate
First, you need to understand your interest rate. This is important because it can significantly impact how much money you save and how quickly you pay off your balance. Many people make the mistake of only looking at their credit card’s annual percentage rate (APR), which is typically very high compared to its fixed interest rate. But it’s also essential to look at when that APR kicks in, usually after you carry a balance for three or six months (or longer). For example, if your interest rate was 20% and that APR kicked in after one month, that would be significantly higher than if your card charged a 15% interest rate but didn’t start applying those fees until several months had passed.
5) Start Earning Rewards Today
Credit cards offer lots of rewards to users. If you pay your bills in full each month, using credit cards can be a great way to earn travel points, cashback offers, and other perks. Make sure you’re aware of all your rewards options before using your card for any purchase. slice app can help track your rewards and offer you the best cashback offers.
6) Cash In On Free Money
Many people don’t take advantage of their cashback card benefits, but there are several ways you can use your credit card to score perks that save you money. For example, sign up for your credit card company’s rewards program and earn cashback rewards on every purchase. (As long as you pay off your balance in full every month.) Some major cards even offer airline miles or similar perks for every dollar spent. Another trick is to use one card for nonessential expenses (so-called sin spending) and another for regular purchases like gas, groceries, and clothes; if you play it right, using two cards could save you hundreds of dollars a year in interest charges alone.
7) Avoid Annual Fees By Moving Balances Around
Don’t get a credit card having an annual fee if you can avoid it. But sometimes that’s not possible (especially in college), so try to offset that cost by paying off your balance in full every month—and then moving any balance left over to a 0% balance transfer card (like Balance Transfers) for a year or two. Sure, there are fees associated with transferring a balance from one card to another, but at least you won’t be stuck with an annual fee for your whole freshman year of college. Just remember: It’s much better if you can avoid carrying balances on multiple cards altogether.
8) Know When To Cancel
Not all credit cards are worth holding onto. If you carry a balance on your card, don’t qualify for any more rewards or incentives (thanks to a high annual fee), or have an offer that’s too good to turn down, it may be time to cancel your card. When you do so, ask for an account manager or retention specialist at your bank to try and negotiate better terms with them. And if they won’t budge? It doesn’t hurt! Don’t be afraid to go back again later; there’s no harm in trying again in six months when your account is older and you have even more information and leverage with which to negotiate better terms—if needed.
9) Don’t Spend Out Of Desperation
Using a credit card to pay for basic necessities, like food and rent. You may feel your only option is to take out a high-interest loan—which you’ll pay back over time—but that’s not always true. Try asking your friends or family members if they can help. Also, think about scaling back on expenses that are difficult to reduce without making major life changes (e.g., going out more often) to create more room in your budget for living essentials.
10) Reward Yourself But Balance It Out!
Many credit cards offer reward programs for frequent users. Airline miles, hotel rewards, and free cashback are just a few of these incentives. This can be an effective way to pay down your balance if you charge a lot each month and use that reward toward paying off your credit card bill before interest is charged. Many credit cards offer reward programs for frequent users. Airline miles, hotel rewards, and cashback are just a few of these incentives. This can be an effective way to pay down your balance if you charge a lot each month and use that reward toward paying off your credit card bill before interest is charged.
If you’re a disciplined, responsible credit card user—and the chances are good that you are, if you’re reading this post—then these tips should be all you need to keep your balance in check. But if spending is an issue for you, then there are more drastic steps to take. Before applying for any new credit cards or free cashback cards, you need to make sure they fit your spending and budgeting goals. Do you have any queries, let us know in the comment box.