Regardless of how familiar you are with credit cards, there are always things you can do to improve your spending habits (and give your credit score a boost along the way). Here are some of our tips for responsible credit card use.
Automatic Monthly Payments
If your budget allows, a great option is to set up automatic monthly payments. You can usually do this online or over the phone, and all it means is that your money will automatically be transferred from your debit account into your credit account when the bill is due.
If your credit card bills tend to be consistent and your biggest worry is simply forgetting to pay your bill in full and on time, this can be a great option for you. However, if your monthly bill varies drastically from statement to statement (or you’re self-employed/are never sure exactly how much money you’ll have in your account at any given time), it’s probably best to pay your bills manually – either in one lump sum when you have the money or in manageable chunks throughout the month.
Set Up Reminders
To make it easier to remember, you can sign up for email or text reminders from your bank. Another good option is to set up calendar alerts in your phone that remind you to pay (this is especially convenient if you have to break your payments up over the course of the month).
E-Banking is a Must
Everyone should use e-banking to make bill payments easier and far more convenient. While paper bills have their positives, the freedom of being able to log in and check your statement at any point during the billing cycle is a big plus. Online banking helps you prioritize your payments (and also lets you make said payments from your computer/smart phone/tablet etc). E-banking also means you can check to see how much credit is available to you at any given time and lets you view old statements with the click of a button. Even if your debit and credit accounts are not housed at the same financial institution, you can use e-banking to pay all of your bills.
Pay Your Bill in Full
This is standard across the board but do your absolute best to pay your balance off in full by the due date every month. It not only shows your bank that you’re financially responsible (so your credit score stays high) but it prevents your from falling into debt. In addition to checking your statement every month, you should read through each and every charge to make sure there are no errors or fraudulent purchases. Banks usually give you 30 days to dispute any charges on your statement, and as long as you do your due diligence, you will not be held accountable.
Don’t Exceed 2/3rds of Your Limit
If you can, do your best to stay within 30% of your credit limit. This definitely isn’t convenient or even possible for everyone (especially if you have a low credit limit), so at the very least do not surpass 70% of your total credit limit. You want to be able to show creditors that while you use credit, you don’t rely on it (and you also want to make sure you have funds available in case of emergency.)
Think Before You Buy
Credit cards enable impulsive purchasing because 1) the money is there and easily accessible and 2) you don’t have to pay it back right away, giving the buyer the illusion that they’re spending responsibly. Giving into impulsive shopping is the surest way to wind up over your head and in debt. Seriously think before making a purchase, and try to save your credit card for the purchases it’s really necessary for. The more you can get into the habit of using debit and cash (money that is yours rather than borrowed) the better.
Don’t Cancel the Cards You Don’t Use
While you might think it’ll make your credit score look better, cancelling and closing the accounts of credit cards you no longer use actually negatively affects your record. That doesn’t mean you have to keep using the cards; just put them away in a drawer somewhere and make at least one purchase a year to keep the account active. You can also use it to pay small consistent monthly charges (for instance, your netflix bill or the yearly fee for an amazon prime account).
Remember that while your credit card has many perks and conveniences, it’s still borrowed money. As long as you act responsibly and don’t spend more than you can actually afford to pay back, you’re on the right track to financial security.