Growing up, my parents warned me about getting credit cards, saying that I could end up in a lot of debt and ruin my credit. They weren’t entirely wrong; mismanaging your credit cards can have serious financial repercussions and severely impact your credit score. However, using credit cards is a step in the right direction to having a diverse credit portfolio, and when used correctly, are a beneficial tool in developing and maintaining good credit!
You may be asking, “So, what exactly do you mean by using my credit cards correctly?” The following are six tips that everyone should follow to help manage their credit card debt and maintain a healthy credit score.
- NO Late or Skipped Payments
Late or skipped payments can result in a considerable amount of points being taken from your credit score, not to mention late fees and increased interest rates from your financial institution.
- Keep Your Balance Below 30%
Never carry a balance more than 30% of your total credit limit. Credit cards are meant to be used! Generally, as long the balance you carry from month to month is no greater than 30% of your card’s limit, your credit score will remain unaffected.
- Needs Not Wants
Use your card for what you need, not what you want. By using your card for items that you need and would normally buy, you can ensure that what you’re spending isn’t beyond your means, therefore helping you avoid unnecessary debt.
- Pay Off Your Balance Every Month
While it’s okay to carry a 30% or less balance, by paying off your balance off every month you can ensure that you don’t accumulate debt or miss payments.
- Don’t Open Too Many Credit Cards
By opening too many credit cards, especially too many at one time, you can lose massive amounts of points on your credit score. This can also be seen as a sign of potential escalating debt to lenders.
- Shop Around
Shop around for the best interest rates and rewards. Before applying for that credit card, take a look around to find the best deal. Try to choose the right card for you, whether it’s a card with super low interest rate or one with great rewards. We'll be launching some great new cards soon ourselves for you to consider.
By being sure to make payments on time, limit the balance you carry from month to month, budget, and limit the number of credit cards you open and use, you can increase your credit score and enhance your payment history. Lenders look at both of these when deciding to approve or decline applicants for loans. A good credit score can lower your interest with lenders, resulting in less money paid over time and more money saved!