Tips for Using Credit Cards Wisely

“Sure, just charge it to my credit card.” It’s a phrase we say at stores and restaurants from time to time, especially when we’re making unplanned or big purchases. Credit cards are convenient and common among most adults, but unless you use one carefully, you could find yourself in financial trouble. Here are some tips to help ensure you use credit cards wisely:

Charge Responsibly
Credit cards and frivolous spending can be a recipe for financial disaster; too many impulse buys could add up quickly and bury you in debt. Try to use a credit card only for items you need, rather than want, and for emergency situations. Consider a credit card as a loan to yourself for when you don’t have cash on-hand, and stick to a budget that allows you to repay the debt fast.

Furthermore, charging too much to your credit cards each month or “maxing” them out impacts your credit utilization ratio, a measurement that could jeopardize your credit score and a lender’s willingness to offer you loans.

Practicing credit card discipline, especially when out shopping, is easier said than done. To help keep yourself in check, see if you can sign up for balance alerts with your credit card provider that let you know when you’ve reached a self-imposed spending limit. You could also request to lower your credit limit to a more manageable amount.

Pay the Full Balance
One of the best ways to get the most out of your credit card is aiming to pay your full balance every month. Doing so will allow you to avoid paying any interest charges, which build up and cost you more the longer you keep a balance on your card.

Even with proper budgeting, unforeseen circumstances might prevent you from being able to afford paying the entire balance during some months. In those instances, make sure to pay at least the minimum amount, and try to refrain from charging more before paying off the remainder.

Always Pay on Time
Regardless of whether you can afford the full balance or the minimum payment, make sure to pay your credit card bills on time every month. Late or missed payments not only result in late fees and interest charges, but could also negatively affect your credit score for several years. Conversely, paying your bills on time can boost your credit score and signals to lenders that you’re a reliable borrower.

To help avoid missing a payment, ask your credit card provider to change your bill’s due date to a more convenient time. By moving the date to right after your work payday, for example, you’re more likely to have money to pay the bill than you would a few days before getting your paycheck. Also, if you have multiple credit card bills, synchronizing their due dates could help ensure you don’t forget about one of them.

Take Advantage of Rewards
Many credit card companies offer rewards programs, so if you’re going to use a credit card, you might as well consider one that has added benefits. Available bonuses include frequent-flyer miles, cash-back and hotel points, among other perks.

This doesn’t mean you should increase your credit card spending just to earn rewards, though, and be mindful that unless you pay your balance in full every month, the interest you’d have to pay could essentially cancel out the value of any benefits earned.

With these helpful tips for using credit cards wisely, you’ll be able to reap the benefits of your cards while avoiding financial missteps and living within your means.

This article is intended for informational purposes only and should not be construed as professional or legal advice.