credit card

Like money, credit cards are merely a tool that allows us to build a financially stable world around us. Most people tend to abuse their power and get into financial trouble. Use it wisely and the investment will be well worth it.

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Build Your Credit

The best way to use a credit card is to build credit with it. Don’t apply for a credit card to buy things; this will lead you to financial ruin.

By building your credit you show lenders you’re responsible enough to borrow money and pay it back. Paying your credit card on time will boost your credit score which will allow you to qualify for bigger financial goals such as financing a car or purchasing a house in the future. Your future self will thank you for building your credit score!

Keep Your Limit Below 30%

The last thing you want to do is max out your credit card. This will have a negative effect on your credit score, OUCH! High utilization presents a high risk of falling behind on payments to the lender. Minimize the amount used to keep your credit score afloat. Keep your limit at or below 30%. If your credit line is $1,000.00 use up to $300.00 of credit.

Avoid The Quicksand

The moment you act upon impulsive purchases is the moment you give up your financial freedom. These choices will unfortunately result in a cycle of poor spending habits and lead you towards a world most people are trying to escape. Avoid the impulsive purchases, the transaction can wait.

Be careful when lenders increase your credit line. They will first increase it when you’re doing a great job of paying on time. The second time they increase it is a strategy to trap you in the quicksand. Don’t fall for it! Only use the 30% of credit line on the increase if you’re able to pay for it. You do not want to fall behind or make payments on large purchases. You will end up pay the banks money out of pocket due to the interest.

Smart Transactions

Use your credit card for expenses such as fuel, small groceries, misc. purchases for your home (lightbulb, screws, cleaning products, etc.), and in some cases, for an emergency. What all these things have in common is that they’re fairly easy to pay back for. These are perfect small ticket items to help build your credit score.

Make On-Time Payments

Schedule automatic payments in order to avoid late fees. The responsible thing to do is pay your bill on time in order to keep building that momentum that will positively affect your credit score. Late payments never look good to a lender so prove yourself trustworthy and responsible!

Avoid The Interest

Avoid the interest rate by paying your bill in full. Once you start making minimum payments on a credit card your remaining balance will accrue in interest. Remember, a credit card is a tool so use it to your advantage, not for someone else’s.

If you used your credit card for an emergency and can’t pay it in full, close it in two to three large payments. One of the benefits of having a credit card is that if your personal savings have taken a hit, you’re not without temporary help. Be sure to close the credit card, work on your emergency fund, and continue to use it wisely so you won’t rely on it for another rainy day.

On Another Note

Transfer Debt To A 0% APR Card

If you have too much debt on a credit card consider transferring it over to a card with 0% APR in order to avoid the compound interest on it. This will allow you to catch up without any additional fees. Take advantage of not having the interest and reach your goal!

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