Today, consumers need as much advice as possible when it comes to managing finances and avoiding pitfalls caused by overspending. Credit cards are really useful, but they might also cause a lot of debt! Read on to learn some of the best practices to use when dealing with credit cards.
Do not use your credit card to make purchases or everyday items like milk, eggs, gas and chewing gum. Doing this can quickly become a habit and you can end up racking your debts up quite quickly. The best thing to do is to use your debit card and save the credit card for larger purchases.
Do not use your credit cards to make emergency purchases. Many people believe that this is the best use of credit cards, but the best use is actually for things that you purchase on a regular basis, like groceries. The key is, to only charge things that you will be able to pay back in a timely manner.
Ensure you understand how closing an account will affect your credit score. Sometimes closing credit cards can leave negative marks on credit reports and that should be avoided. If your card has been around awhile, you should probably hold on to it as it is responsible for your credit history.
Keep an eye on mailings from your credit card company. While some might be junk mail offering to sell you additional services, or products, some mail is important. Credit card companies must send a mailing, if they are changing the terms on your credit card. Sometimes a change in terms can cost you money. Make sure to read mailings carefully, so you always understand the terms that are governing your credit card use.
Always know what your utilization ratio is on your credit cards. This is the amount of debt that is on the card versus your credit limit. For instance, if the limit on your card is $500 and you have a balance of $250, you are using 50% of your limit. It is recommended to keep your utilization ratio of around 30%, in order to keep your credit rating good.
The key to using a credit card correctly lies in proper repayment. Every time that you don’t repay the balance on a credit card account, your bill increases. This means that a $10 purchase can quickly turn into a $20 purchase all due to interest! Learn how to pay it off every month.
The interest rate in the initial offer is not always the interest rate your card will have. Remember, the credit industry is competitive between companies, and each company has different rates available to them. If you don’t like your interest rate, make a call to the bank and talk to them about it.
In conclusion, consumers often fall victim to the negative effects of credit cards, such as high interest rates. The best ways to use credit cards has been covered in this article and hopefully, you have found this information very useful and applicable to your everyday spending habits.