Last week, we discussed how you can get out of credit card debt. Whether you have had credit card debt in the past or you never have, I believe that credit cards can be a good thing when used responsibly. Learning how to use credit cards responsibly is always a great idea so that you don’t go into credit card debt, so that you don’t add to your credit card debt, so that you don’t ruin your credit score, and more.
If you learn how to use credit cards responsibly and to your advantage, then I believe you can leverage credit cards for many different reasons. Below is how you can learn how to use credit cards responsibly.
Read and understand the terms of the credit card.
Have you ever actually read your cardholder agreement that you receive when you first get approved for a credit card? You should always understand what the terms of the credit card are.
You should know what your interest rate is, when your credit card payments are due, how many months are remaining on your debt if you only pay the minimum payment, what your credit limit is, and so on.
Also, you never know if there are changes to your credit card terms without reading these. Occasionally, you may receive a notice about future credit card term changes. Changes to your credit card terms could possibly include:
- Interest rate increases or decreases
- Credit limit increases or decreases
- Annual fee changes
- Changes in reward programs.
Only buy items you can afford.
If you cannot afford an item, then you should not be looking to your credit card to “help” you afford it. You should only buy items with your credit card that you know you can positively pay off by the credit card due date, because you never want to pay high interest charges.
If you are not good with this step, then you should try to leave your credit card at home if you are about to go shopping.
Pay your bill in full each month and make sure to pay your bill on time.
Only making minimum payments means that interest will most likely build up and this will cause your payoff date to be further away. Also, if you make no payment at all then you are hurting both your credit score and you are also causing your overall loan amount to increase because of penalties and interest charges.
You should always try to pay your credit card bill in full and on time. If you are late, then late fees may be added to your bill and it will show up on your credit report as a late payment. These are both things that you do not want.
Don’t max out your credit cards and watch your utilization rate.
If you are trying to use your credit cards responsibly, you should always be mindful of your credit limit. You never actually want to get too close to your credit limit. Maxing out your credit cards can mean additional fees being charged and also purchases being completely denied.
You should always try to stay at around 35% or lower of your credit card limit because this helps your credit score. For example, if your credit limit is $1,000, then you should try to never go over $350 on your credit card.
Go through your credit card transactions each month to make sure there are no mistakes.
I check my credit card transactions all the time. I prefer to check them at least once a week. Once a month works for many, but for me it can sometimes be too long of a period for me to remember every single transaction and carefully track them all.
Occasionally, there may be a mistake on your credit card. You may have been charged twice by accident for a purchase, you may have been charged too much, someone may have placed a purchase unknown to you on your credit card and so on.
If you never check your credit card statement, then no one would ever know that there is a mistake. Your credit card company cannot check everything and this is where you come in. When you find a mistake, you should call your credit card company immediately and try to resolve the issue.
Call your credit card company as soon as possible if you lose your credit card or someone steals it.
If you lose your credit card or see an unfamiliar charge on your credit card, you should call your credit card company immediately. Never put this phone call off. The longer you wait, the less likely your credit card company will be able to help you out.
Usually, you may be held responsible for up to $50 of fraudulent charges if you call within the first day of your credit card being stolen. Some companies cover all fraud though. If you call right when you lose your credit card and before any fraudulent charges are placed, then your credit card company will usually not hold you responsible for the charges.