Best Practices for Credit Card Users

It’s no secret that responsible credit card use can have long-lasting benefits on a person’s finances. When you use a credit card right, you build a good credit score and establish a good reputation with the banks, which makes you an ideal candidate for things such as mortgages, car loan rates, and lines of credit that you need and that fir with your budget.

But it’s also no secret how much credit can negatively impact a person’s finances. There’s a serious lack of financial education out there, which means that many individuals wind up misusing their credit cards right from the get-go, then struggle to make payments while they collect interest and mess up their credit score.

In some cases, you might find that you can’t pool together the funds to pay your credit card bills along with all your other expenses. If your credit card usage is causing stress in your life and leaves you often looking for where to borrow money when you need it fast such as a payday loan lender or a short-term online loan, then it’s time to build some healthy money habits. An online direct lender can give you the financial boost you need to correct cash flow in-between paycheques, but let’s also look at how you can establish good credit card use habits. Read on.

Credit card

Spend What You Can Afford

Seems simple enough but this is one rule that can be hard to follow when using your credit card. Sometimes we start out using credit cards and tell ourselves we will follow this rule, but that isn’t always the case.

One way to get around this is to treat your credit card like a debit card. When you do so, you should never carry a balance. If you don’t have enough money in your checking or savings account and you only have a debit card, then you simply have to hold off on making the purchase.

Start Building Credit Early

When it comes to a healthy credit score, time is your friend. It is important to proactively manage your credit cards as early as possible to help build your credit score. The longer you have credit card account, the better off you are in terms of establishing a strong and healthy credit score.

Additionally, if you have the discipline to manage your credit, get started early. If you have a child under the age of 18 and want to set them up for credit success, then consider adding them as an authorized user to one of your credit cards to start building their credit (they don’t even have to use it). This will also be a good opportunity to teach good credit card habits and get your child comfortable with their finances.

Credit Utilization Ratio: Keep It Below 30%

What is a credit utilization ratio? Simply put, it is the amount spent divided by your credit limit. For instance, if your limit is $10,000 and your credit statement at the end of the month is for $5,000, then your credit utilization is at 50%. To improve your credit score, however, you should aim for a ratio below 20-30%.

Don’t Miss Payments

Sure, this is as obvious as it gets, but that doesn’t mean it’s any less important. Your payment history has a big impact on your credit score. Are you great with your payment schedules and have never missed a payment? If you have a flawless history, congratulations! If you’re hoping to never miss a payment again, it’s possible to reach that goal.

Set up auto-pay so that you can make additional payments to a big, carried-over balance and start to chip away at your credit card balances. With auto-pay, you remove the human error that comes with simply forgetting and make sure that you’re always doing something to improve the state of your credit score.