Responsible Credit Card Use

 

With the bad rap that credit cards have gotten, you’d think that they’re pure evil. While credit card use has the ability to destroy reputations and credit, responsible credit card use can actually help you establish good credit. That probably sounds a bit crazy, but it’s actually true. If you use your credit cards responsibly, you are showing perspective lenders that you are a good, reputable person to loan to. As a result, they’ll be willing to give you loans at good interest rates.

One of the pitfalls with credit cards is that most people do not know how to responsibly use them for the right reasons. Thus, they fall into deep debt which harms their credit. You’re probably wondering “how can I avoid this pitfall?” Well, it’s actually pretty easy, provided you are able to use some self-control when reaching for the credit card. We’ll give you seven easy, quick tips for making sure you use those credit cards the right way.

Tip #1: Never Charge More Than You Can Afford

This seems like an obvious tip, but it’s something that most people do not follow. Often times, when we are given a piece of plastic that enables us to charge thousands of dollars and not have to pay that back for a certain amount of time, we are tempted to charge as much as possible. Even if we can’t afford to pay for all the stuff we charge, we still do it because it feels great to buy things. Indulging makes us happy. However, once you receive the first bill and realize you cannot afford it, you are often shocked and unsure how you’ll be able to pay it.

How can you avoid this? By simply not spending more than you can afford! Before you go to charge anything, think about the purchase. Is this something you can afford to pay for within a month or two? If not, do not purchase it.

Tip #2: Pay Back the Entire Balance at the End of the Month

For years many financial experts have recommended this obvious tip. Despite how well-recommended it is, many people neglect to do it. Carrying large debt balances from month to month, even if the payments are made on time, is bad for your credit. That’s why paying off the entire balance at the end of each month is so crucial—it lets creditors know that you are serious about paying back any debt you may incur. To make this tip really work for you, you must make use of tip #1 which is to not overspend. If you spend more than you can afford to pay back in one month, you will not be able to pay it all back at the end of the month.

Tip #3: Never, Ever Use Your Credit Cards to Pay Off Other Debts

A lot of people who cannot afford to pay one bill may use another credit card to pay it. This is really destructive behavior, as it only puts you further in the hole. Even though it may seem like a good idea at first, the debt always catches up to you and it is often worse than the first time. So do not ever use a credit card to pay off another bill, as it will only harm your credit rating and put you even closer to going bankrupt.

Tip #4: Keep Track of All Credit Card-related Purchases

When you use your credit cards to make a purchase, be sure to save every single receipt. This allows you to see how much money you have spent before receiving the monthly statement. It also allows you to potentially spot any errors the credit card company could make in regards to your billing statement. Finally, it holds you accountable—just seeing how much you’ve spent in the past day or week can prevent you from making purchases that you cannot afford.

Tip #5: Always Pay Before Due Date

One of the huge mistakes many people make is to not pay their credit card bills on time. As a result, late fees begin to accumulate, making it even harder for credit card holders to pay back their debt. The simple way to avoid this problem is to pay your bills before the due date—if possible, send out the money a week before the date, so that there is adequate time for the money to reach the company. Doing so prevents late fees from ever happening.

Tip #6: Don’t Use Credit Cards for Every Single Purchase

It is tempting to abandon cash and checks and use credit cards for most, if not all purchases. However, this really isn’t a good idea. You have to remember that on every purchase you make, there is an interest rate. If you’re spending $25 on a t-shirt and use a credit card to pay for it, you may actually be paying $35 on the shirt once interest is factored in. For one item, this may not sound like much. But if you do this several more times, the money begins to add up. That’s why you should avoid using credit cards for every purchase. Try to use credit cards only when absolutely necessary.

Tip #7: Before Making a Big Purchase with a Credit Card, Think About It

Before making a big purchase using a credit card, most responsible credit card users take the time to think the purchase through. They may ask themselves the following questions:

1. Can I afford to pay this back within a month or two’s time?
2. Do I absolutely need this item right now?
3. Would it be better for me to simply wait a month or two to save the cash and pay for the purchase with money and not a credit card?

The answers to the above questions will tell you whether or not you should use a credit card to purchase the item in question. If you can afford to pay it back within a month or two’s time and need the item now, charging is probably a good idea. If not, you should simply wait and save your money to purchase the item without the use of a credit card.

By applying the above tips to your credit card use, you can become a responsible credit card user. Good luck!