Using Credit Cards the Right Way
Credit cards are very common and nearly everyone has one. When used properly, they are convenient, they can help you improve your credit rating, and they can potentially even earn you some rewards points (depending on the type of card you use). However, credit cards also make it incredibly easy to run into money problems and build up large amounts of debt.
Whenever you use a credit card, it’s important that you use it wisely. Here are some tips to help you use your credit cards without ending up in debt trouble.
Keep Track of your Spending
One big risk with credit cards is that they make it very easy to spend money without thinking. You can swipe or tap with ease, and potentially rack up a lot of debt without even realizing it. That’s why it’s so crucial to track your spending. Whenever you make a purchase, note the purchase and its cost somewhere. You can use an app on your phone, a spreadsheet on your computer, a pen and paper, or whatever method you’d like. The important thing is that you record your purchases shortly after you make them, so you don’t forget any. By tracking your spending, you’ll be able to see where your money is going and have an easier time staying on budget.
Most credit cards also let you keep track of your purchases online by viewing your statement on their website or app. It’s important to note, however, that these records can often be out of date by a few days. This means you’ll need to take this into account when budgeting.
Pay Off Your Balance in Full
Most credit cards charge very high interest rates. If you carry a balance, you could soon find yourself paying a lot of money in interest every month. Be careful not to spend more than you can pay off each month to avoid these interest payments. Interest can quickly overwhelm your budget and lead to serious debt problems.
If you’re not able to pay your balance in full, do your best to pay as much as you can and always try to pay more than the minimum. If you only pay the minimum balance, you’ll pay a lot in interest and it will take quite some time to reduce your debt.
Plan for How to Pay Off Purchases
As mentioned, you should always attempt to pay the full amount owing on your credit card. If this isn’t possible, you should pay as much as you can. One thing that can help you do this is to always have a plan for how you’ll pay off your purchases before you make them.
For instance, if you decide to spend money on a new pair of shoes that are on sale, before you use your credit card, think about your budget and how you’ll be able to pay your bills. If you’re not able to come up with a plan for how you’re going to pay for an additional purchase once your credit card bill comes, you shouldn’t make that purchase.
Before you buy anything, consider leaving the store or closing the website and reviewing your budget. This “cooling off period” will help you think more clearly.
Have you already allocated all of your money for the month or do you have anything left over? You may have to move things around to afford the desired purchase. Are you okay with that? For instance, to buy the shoes you’re interested in, you might have to spend less money eating at restaurants. Is this trade off worth it? If it is, you can consider buying the shoes. However, if it isn’t or if you can’t make the numbers work, it’s a good idea to reconsider the purchase.
Find the Right Card for You
There are lots of different credit cards and it’s a good idea to find the one that makes sense for your situation. While many credit cards offer rewards, points, or other benefits, it’s important to look into the fine print before you apply for any credit card. Some cards charge monthly fees, for example, and these costs can certainly add up over time.
Look at all aspect of a card before you consider getting it and do your best to get a card that works for your needs.