How to use a Credit Card Wisely

Most people believe they should have a credit card in order to prove they are an adult and able to build a credit score. The truth is that most people take this idea too far and begin charging purchases they cannot afford. Typically this is called “living beyond one’s means.” While there is no credit card rule book, there are several concepts every credit card user should know.

Use a Credit Card Wisely Read the Fine Print.

Before signing on the dotted line to open a credit card, be certain to read all of the terms you are agreeing to. Some areas that are especially important include, but are not limited to:

• Privacy Agreement
• Annual Fee
• Variable Interest Rate Calculations
• Late Fees and Other Account Level Charges

Use Your Credit Card Wisely for Infrequent Purchases.

Credit card companies encourage users to charge everyday purchases such as gas, groceries, and dining out. Most credit card companies go so far to reward users if they do so. That fact alone should be a warning flag for consumers – credit card companies profit when spending becomes out of control. Every day charging is easy to take for granted. The best advice is to simply keep everyday purchases off your card completely.

Paying the Minimum on you credit card is a Bad Idea.

Minimum payments are good for the credit card company, bad for the consumer because they extend the length of time it will take to pay off the balance. Pay as much as possible each month to decrease balances quickly.

Communicate with Your Creditors.

Before something goes wrong in your account, a late payment or other delinquency, contact your creditor and let them know. Many times companies are willing to work with borrowers and find a solution.

Review Your Credit Card Statement Monthly

Watch for fraudulent charges and anything out of the ordinary. Review your interest rate monthly for any increases. Also take a long hard look at any interest amounts you are paying and keep your spending in check. If there are charges that appear to be unauthorized, a consumer typically has 60 days to dispute them.

Living within one’s means will lead to good credit scores and financial happiness. How a person uses credit and credit products determines his or her future ability to borrow funds. Using credit cards wisely, reading and understanding credit card terms, and communicating any account disruptions will increase the chances for credit card success.