Use a Credit Card the Right Way and Avoid Making Mistakes

Believe it or not there actually are right ways to use a credit card that can actually be financially smart but it’s the mistakes that will get you in trouble.  With the amount of fraud these days, it’s risky to even use a debit card, with your bank account potentially being wiped out if anyone was able to grab your information, until you sort everything out.  Making credit card mistakes are common, so try and avoid these so you can continue down the right financial path.

Not Taking Advantage of Rewards

By making the purchases that you would be making anyways you can earn rewards in the form of miles, points you can redeem for gift cards, or even a cashback check, depending on the card.  Not taking advantage of a credit card without rewards is essentially leaving free money on the table otherwise, which depending how much your expenses in a year are that you could use on your credit card, could be worth up to a thousand dollars in rewards, again, just by making the purchases you would be making anyways, like lowes build and grow.  Seeing the rewards add up and make more purchases than you can afford is where you would get in trouble when the interest you pay far exceeds the rewards earned.

Not Using Store Card

If you shop at a certain store, whether it’s for clothes, or electronics, or both, it may actually be worth it to get a store credit card to use for those purchases.  By signing up for the card in the first place you can save off the bill as a promo percent off, but also you can receive coupons in your email for future sales, not to mention by continuing to use your card you can continue to save money off each purchase, so if you can keep spending under control, could be worth getting to save the most on what you purchase the most outside of necessary expenses.

Carrying Over a Balance

Probably the worst thing you can do as a customer, but what the credit card companies thrive on, is carrying over a balance so that you can be stuck with the APR, which on some cards, could be upwards of 16%, adding a huge portion of the payment depending on the balance that you are carrying on the card.  If you can pay off the full statement balance by the due date, then using a credit card is actually financially smart.

Not Using a Balance Transfer

If you are stuck paying a high interest rate on your outstanding balance then perhaps it’s time to do a balance transfer where you can catch one for 0% and really have your monthly payments go towards chipping away at the balance.  Keep in mind there will be a transfer fee, which could 3-5% of the transferred balance, which depending on the balance, could be a few hundred dollars, but would still be worth it if you figure how much you are saving on interest over the long haul.

Focus on Raising Your Credit Score in 2018

There’s plenty of talk about a resolution to lose weight, but what about your finances?  How about your credit score?  Those seems to be targets that are more important than probably losing ten pounds for beach season.  Instead of spending your days asking what a aaa membership cost, how about taking a hard look at your credit score and look for ways to improve it, so you can take advantage of the best interest rates on the market when looking for a mortgage, loan, or a new credit card.

Review Your Credit Report

There is so much fraud these days that you never know who has your information at this point, so it’s a good idea to check to make sure that your credit report is up to date, and more importantly, accurate.  The three major credit bureaus will provide a free copy of your credit report once a year so you can review, although it will not have your score.  You can see your credit score month over month on your credit card statement, which now lists the score each month so you can make sure it’s trending in the right direction.

Never Miss a Payment Due Date

One of the most influential pieces of your credit score is history.  Now paying past the due date will not hit your credit, although you could be in for a late fee or interest rate spike.   Any late payments that are thirty days late and more will severely damage your score so it’s always important to make sure they are paid by the due date, if not earlier.  The more you continue with on-time payment you should see your score rise as you are establishing a positive credit history, showing lenders that you are a responsible borrower.

Eliminate Debt

Just as important to your score as payment history is the amount of debt you carry, in other words, the credit utilization between the balances and the overall credit limits that you have.  If you have, say, multiple cards but only have a balance on one, your score should be improved instead of maxing out one card.  The more you pay down your debt to the overall credit limit the more you will continue to see your score improve, and not only that, less interest payments that you will need to make once you get rid of your debt and are in the clear going forward.

Consolidate Balances

Whether it is taking out a new credit card offer for 0% APR to transfer balances, or even taking out a debt consolidation loan, by weighing the pros and cons being having the debts paid off sooner than making minimum payments vs, cost, it may make sense to combine your balances and consolidate debt so that you can get a handle and finally be debt free.  Once debt is paid off you can focus on putting your recently freed up money to more important areas such as building an emergency fund and saving for your future.

4 of the Biggest Credit Card Myths

While there are virtually endless amounts of credit card offers that come in the mail, or you have one that you’ve had but only keep for emergencies, you may not be taking full advantage of the benefits of all that a credit card can do for you.  While they may have had a bad reputation in the past, there are actually more pros then cons for having one, as long as you can curb the spending, so ignore any myths that are out there.

Having a Card is Unnecessary

Well, it’s not life or death that you have a credit card, but they can actually provide plenty of benefits that you would not get otherwise with a debit card.  They provide great fraud protection, especially these days with the number of hacks, if your card is breached, then any charges that you are hit with do not clean out your bank account and can remain pending on the credit card until the dispute process is resolved.  In addition, credit cards offer some of the best rewards, which you can earn cashback on the normal purchases that you would make anyways, so why turn down free money.

Credit Score Isn’t the Most Important

Unless you don’t mind paying a higher APR % and waste money on higher interest payments every month, let alone getting approved at all, go right ahead and let your credit slip.  For those that do care about their credit and strive for it to be the highest it can, are rewarded with the best interest rates on the market, which could save hundreds of dollars a month on say, a mortgage, while keeping car payments lower, and able to pay little interest when repaying a credit card balance.

Closing an Account with Zero Balance

Getting into debt can be a huge weight on your shoulders, and depending on the balance, could take years to get out of, so when you finally do rid yourself of a credit card balance, the first reaction might be to close the account, cut up the card, and never use a credit card again.  Now while you can opt for cutting up the card and never using again, you should actually keep the account open so that the available credit actually improves your score, and closing could great reduce, depending on the size of your other accounts and the balance against it.

Nothing Wrong with Making the Minimum Payment

Now while you will certainly be in good standing with the credit card company by making the minimum payment, as I’m sure you would be their favorite customer, with your monthly payment just barely covering the interest payment and doing little to chip away at the actual balance, could in fact take decades to get rid of the balance.  Sure, you will not be penalized by the company for making the minimum but you are only hurting yourself by wasting money away every month on interest, when it could be best used for more important things like saving for the future, or even taking a vacation.