A credit card is very beneficial when used responsibly. Making regular payments that are on time can boost your credit rating. Most cards offer rewards for purchases that you can use towards other purchases or get cashback! Some even have a temporary 0% interest rate on balances that carry over from other credit cards.
However, if your credit spending goes too far, monthly payments and interest can become a problem quickly. The following are a few credit card tips to help you avoid these common problems.
Balance Alerts Can Curb Spending
If you routinely pay off your credit cards in full, you’ll avoid interest charges.
Most credit card lenders will allow you to set up notifications for balance alerts. A text, email, or in-app message can appear notifying you that your balance is nearing a specific level that you previously set. Creating a budget and respecting it is the best way to avoid overspending.
Spending Analysis Tool
A spending analysis tool allows you to track how much you’re spending, and where. With this tool, your financial institution then analyzes this information which shows you how much you’ve spent in categories such as groceries and entertainment. This allows you to easily see exactly where your money is going.
Midcycle Payments Could Boost Your Credit
Keeping your credit utilization ratio under 30% is one way to ensure your credit score remains in good standing. The credit utilization ratio refers to the percentage of total available credit that you are using. For example, if your limit is $1,000 your balance should remain under $300. Keep in mind, however, that this ratio applies to the total of all your cards. Every month the three major credit bureaus receive a detailed report about your account from your credit card lenders. Your balance is always reported, so making a payment midcycle can lower your balance and in turn improve your credit.
Retail Discounts
Many major credit card lenders offer rewards that link to the credit card. These rewards can range from cashback options to free products. Look for cards that offer a rewards program.
Rewards
A benefit such as cashback can save you money on everyday items like groceries or gas, for example. This can really help financially in the long run. If you use a credit card for most of your purchases anyway, it’s logical to use a card that offers rewards. If you pay off your credit cards in full every month and take advantage of benefits and rewards you not only avoid paying interest, but you could end up ahead!
Balance Transfers
It’s always important to maintain a goal of paying off debt as soon as possible, regardless of interest rates. A balance transfer offer on a credit card can reduce your interest payments or put them on hold temporarily helping you pay off debt faster.
The idea is that you move debt from a high-interest credit card to a lower interest credit card. Some cards even offer a 0% intro APR for a specified period.
Avoid Frivolous Spending
You should be cautious with credit card spending. Spending frivolously with a credit card is dangerously easy to do and can lead to debt quickly. Think of your credit card as a loan to yourself that you will pay back as soon as you can to lower or avoid interest charges completely.
Avoid Missing Payments
Ensuring you pay your bill every month is important, even if you can only afford the minimum payment. If you miss a payment this may negatively affect your credit score and might result in late fees and possible penalty interest rates.
While having credit cards can come with many conveniences and perks, beware of the pitfalls since debt can accumulate very quickly.
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