Credit cards have a bad reputation, but they aren’t all that bad. If you know how to use them and not let them use you, they can be a helpful tool in your financial toolbox.
So how do you use credit cards the right way? Check out our tips below.
A credit card isn’t an invitation to spend. Only spend when you have the cash to pay for it. If you have a rewards credit card, earn the rewards paying for things you’d normally buy, but pay the bill off in full. Don’t let the bill sit unpaid. The interest charges will send even the most carefully laid budget awry.
Never pay your credit card bill late. It will cost you as much as $35 just for missing the due date by one day! Not to mention the interest charges that accrue. If you can’t pay it the day the bill arrives (highly suggested), set your calendar so you pay the bill in full before the due date. Don’t wait until the due date, then you’re pressed for time. If you pay it even five minutes past the cutoff time, you’re late.
Use technology to your advantage. Download your credit card company’s app or log in to your dashboard online. Look at your spending. It’s easy to overspend when you have no idea what you charged last week. Look at it daily. Not only will this keep you accountable, but you’ll also catch any credit card fraud right away.
If you can’t trust yourself to stay within budget using your credit cards for everyday purchases, use it for large purchases only. You’ll get the protection credit cards offer for defective or missing items and you don’t have to carry cash.
Don’t make those large purchases if you don’t have the cash, though. Make sure you’ve saved up to pay the bill in full. If not, at the very least, look for a credit card with a 0% APR for the first few months and budget so you pay the bill in full before interest accrues.
If you can’t manage your credit card spending, lock them up. Don’t close them, this hurts your credit score. Instead, put them in a safe, give them to a family member, or hide them in your sock drawer – just don’t use them.
Honestly, credit cards are a great way to earn money back or get great rewards (airline miles, gift cards, etc.) if you use them right.
They are also a great way to build up a solid credit history so when you want something larger, like a mortgage or car loan, you have the history to back you up. Just make sure you know how to use your credit cards responsibly so you don’t get in over your head in debt.