Do’s and Don’ts of Credit Cards

Credit cards can both be an incredibly useful financial tool as well as an easy way to accumulate and carry unnecessary debt. When properly managed, credit cards can make building credit and covering emergency costs much easier. But on the other hand, you can easily become overwhelmed by the interest rate on your card if you mismanage your debt.

Whether you’ve had a credit card for many years or are just getting your first card now, there are certain do’s and don’ts that everyone can learn from to ensure you are using them responsibly. This week, we’re taking a look at some of the best practices of getting and using a credit card as well as what you want to avoid to keep your credit score up.

Deciding on the Type of Card

If you’re new to credit cards the first step to take is deciding on the card type. There are a number of cards with different benefits and functions that you should consider before signing up for a card. This decision is based on what is most important to you.

Do you travel frequently? Then a card that offers air miles or car and gas rewards may be best for you. Or perhaps you are a business owner and need a card to help keep track of your business expenses.

Do some research on the types of credit cards that are available and compare the benefits of each to see what best suits your needs. You’ll need a card that can benefit you in more ways than just simply borrowing money; why not get some more rewards for your credit card use?

Don’t Carry a Balance

To put it simply, do not carry a balance on your credit card. It seems like an obvious rule to follow, but many people still choose to carry large balances on their cards while making minimum payments.

Carrying large debts with minimum payments from month to month will not help you build your credit. Instead, be sure to pay off your balance before your due date as often as you can to ensure a strong credit rating. Using a card regularly and consistently paying it off will ensure a better overall credit rating when it comes time for a bigger purchase like a home.

Do Limit the Number of Cards You Have

It’s tempting to get multiple credit cards and reap the rewards of each, but the reality is it’s going to be much more difficult to keep track of your spending with too many cards. With each card carrying a different balance with different due dates, you’ll find yourself quickly struggling to make the payments on time and tracking the balances of each card.

Don’t Use Cash Advances

Avoid cash advances as much as possible if you can only use them if it’s an absolute emergency. The main reasons to reconsider a cash advance is that you will be accruing interest the moment the advance is taken out and you won’t have any grace periods for the repayments.

What makes these even worse is the fact that you will be charged a small fee on the amount of the cash advance on top of the already high-interest rate you will face. If you are in need of money go to an ATM and take out the cash you need, don’t use a cash advance.

Do Read the Fine Print

Like with all other contracts, a credit card application should be read very carefully as companies tend to hide important information in these small sections. By looking into the terms and conditions before you decide to sign you can educate yourself on how factors like the fees and interest rates of the card work.

By reading the fine print on the contract you will help yourself avoid any simple future mistakes that can harm your credit rating. It’s no surprise that credit card companies make money off those that fail to cover their debts, so learn about your cards due dates, fees, and other rules so you can easily prepare to use your card responsibly.

Don’t Overspend

This final point is fairly obvious but it is vitally important for every credit card holder. Remember, you are borrowing money with credit cards which mean that it needs to be repaid. You are responsible for the debt you accrue and you will be held responsible if you cannot make payments on time.

If you find it difficult to stop overspending there are simple steps you can take to help yourself. Firstly, leave your cards at home if you are looking to stay out of debt as that will force you to use cash when shopping. Next, delete your cards from online shopping sites to prevent you from easily racking up credit debt. Finally, cut up your cards if you find that you can’t seem to control your credit card use. This will force you to call the company to get a new card sent to you if you want to make a purchase.

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