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Credit cards don’t have to be an all or nothing item. While most people either go overboard or choose to avoid them altogether, there’s a happy middle ground where you can enjoy tremendous benefits without being irresponsible.
6 Smart and Effective Ways to Use Your Credit Cards
Most Americans lack the proper restraint and discipline that’s needed to manage credit cards the smart way. Research shows that the average credit card debt per borrower has been on the rise for years now – reaching a peak of $5,472 in the first quarter of 2018.
Furthermore, the percentage of U.S. households with revolving credit card debt on a month-to-month basis has also been increasing. Roughly half of all households carry some credit card debt, and the balances can put a heavy burden on finances throughout the year.
But credit cards serve a very practical purpose and should be viewed as an asset, not a drain on resources. Here are some smart ways you can turn your credit cards into instruments for good:
Keep Track of Important Information
With so many different bills to pay, many people simply forget about their credit cards and miss payment deadlines. This shouldn’t be an issue for you. Create a spreadsheet that lists off each credit card you have open, along with the payment deadline, interest rate, and account information. Having these details readily available will keep you informed at all times.
Pay Your Credit Card On Time
The best thing you can do for your credit score and peace of mind is to pay your credit card on time every month. If forgetfulness is your enemy, set a reminder on your phone or calendar. If you’re having trouble making the payment, develop a budget that allows you to set aside money for the payment purposefully. Whatever the case may be, you need to figure out a way to consistently make these payments.
Pay More Than the Minimums
You’re only required to pay the minimum amount on your credit card each month, but doing so is rarely adequate in the big picture. For example, you might have a monthly minimum of $100, but a balance of $2,000. Paying the minimum for a few months in a row suddenly leaves you with close to $6,000 in debt.
Pay what you can afford, but make it a point to at least pay twice the minimum. If possible, you should pay off the balance in full every month.
Make the Most Out of Rewards
Most major credit cards have pretty enticing rewards and benefits. If you have discipline in how you use your plastic, you can really take advantage of these perks.
“I personally use a credit card for almost all of my purchases since I have a cash back rewards card. This allows me to earn points on my purchases, which I use later to pay off my credit card bill,” says an expert at CardGuru. “It also helps me to track how I am spending my money. In fact, my credit card company even categorizes my spending so I can see in what areas I spend the most.”
Read up on how the rewards programs work for your cards and look for ways to cleverly maximize these benefits.
Don’t Shop On Questionable Sites
When shopping online, only transfer credit card information when you know you can trust the website you’re doing business with.
“Phishers are out there seeking access to your sensitive info,” finance blogger Vincent King writes. “Never send your credit card information over email, or you’re at risk for becoming a victim of fraud. Use a secure site, such as PayPal, to make payments.”
Maintain a Low Utilization Rate
Regarding your credit score, you can do yourself a favor by maintaining a low utilization rate. Your utilization rate is calculated by taking your average monthly spending and dividing it by your approved credit limit. So if you’re approved for $10,000 and spend just $2,500 per month, your utilization rate is 25 percent.
Put Your Plastic to Good Use
That credit card in your wallet or purse doesn’t have to be something you feel guilty about. When used with restraint and discipline, it can prove to be a powerful financial asset that opens up doors, creates opportunity, and helps you achieve your goals. Are you willing to learn how to use your plastic responsibly?