Credit Card Management Tips
Many people enjoy using credit cards in their daily lives for a variety of reasons. Some feel that carrying a credit card is safer than carrying cash. Others enjoy the perks credit card companies give to their customers for using their services. Others find that paying one bill each month to the credit card company is easier than sending money to dozens of creditors. Regardless of your reasons for using credit cards, it is wise to use them carefully and mindfully. Let's go over some tips so that you can manage your credit card wisely!
Track Your Borrowing Habits
The danger in using credit cards comes when you are not mindful of how much money you are charging, so your monthly amount due comes as a surprise. One way to keep this from happening is by tracking your charges each month. Use a budget or keep a spreadsheet of all your monthly charges. Consider even using a checkbook register to keep track of your pending charges. Set yourself a spending limit and stick to it.
Pay Your Bills on Time
Pay attention to the due dates on each of your statements. Paying a bill just one day late may incur late fees on your account. Credit card companies can add a $25 late fee the first time you are late. If you are late twice within six months, the cost could increase to $35. This may not seem like a lot, but why would you want to give your credit card company the equivalent of six or seven coffees just because you did not pay your bill on time? Many online bill paying apps offered through your bank or credit union will allow you to schedule the payment of your bills to make sure you never rack up late fees again.
Paying Full Balance vs. Minimum Payment
Your goal should always be to pay off your credit card each month. This may not be feasible for some people. In that case, pay at least the minimum payment on time each month and if you can, pay a little more than the minimum.
Remember, however, that paying just the minimum payment each month is not a great long-term financial strategy. Paying down your debt will take much longer, and this means you will be spending much more in interest. Your credit score could also be hurt in the process.
Managing Multiple Cards
What happens if you have a balance on several different credit cards? Most financial strategists would recommend you focus first on the credit card that charges the highest interest rates. Put all of your available cash toward that credit card while paying the minimum balance on your other credit card. After the first credit card is paid off, you can put all your resources into paying your remaining debt. Consider setting up an account in our Money Management app to help manage all your cards, and set goals for spending and paying off cards.
Some credit cards users may be persuaded to transfer their balance from one card to another company that offers lower interest rates or finance charges. This may be a good strategy. A lower interest rate can help you pay off your debt faster because more of the money you send to the credit card company goes toward your actual debt and not just the interest.
Keep in mind, however, that transferring your balance doesn't always work out in your favor. Sometimes credit card companies may advertise a low interest rate, but not every customer who applies will qualify for it. These customers may end up paying a higher interest rate than the one they previously enjoyed.
Some credit cards also charge fees for balance transfers and other fees for owning the card itself. Even if your interest rate is lower, the additional fees that are charged could make it more difficult to pay down your balance.
Some people who transfer a balance from one credit card to another may also find it difficult not to recharge items to the first credit card. They may look at the line of credit as an opportunity to do more careless spending.
Credit cards can be convenient and come with a lot of perks, but consumers should be aware of the problems associated with borrowing money. Remember that your credit score is your lifeline for essential life purchases. You need good credit to purchase a car, a home, and any other big-ticket item you may want. Don’t damage your credit by being careless with credit cards. Make a plan and stick to it. Your future self will thank you.
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