A credit card can be a useful tool, but it can also do serious harm to your credit rating if you are not responsible
about how you use your card. This is a list of ways you can practice good habits by responsible credit card use.
- Don’t spend money you don’t have. You should only be using your credit card for purchases you can afford.
The first good habit is paying off your full credit card balance each month before the statement due date.
If you let large balances accumulate for even for two or three months, you can get yourself into debt that could
start to harm your credit score. Paying off the full balance will not only keep you from debt but it will also keep
you from lowering your credit score as a result of too many minimum payments.
- Card with low interest. A card with 0% or low interest can be a great tool for you to manage your
finances. Don’t just apply to any card available, do your research and look around for cards with low interest
rates. If you are ever not able to pay the full balance the interest fees will not break the bank.
This also means you should look for no annual fees. Cards with no annual fees do exist and are the best tool for
responsible credit card use.
- Never take a cash advance on a credit card. Whenever a cash advance is withdrew from your credit card,
high interest fees are assessed and start to accumulate on your balance. When you receive checks from your credit
card company for every day expenses and bills they are sometimes processed as cash advances. An Interest rate on
a cash advance is usually higher than your normal interest rate for every day purchases. Interest starts
accumulating the minute you take the money out.
- Credit card activity/opening and closing cards. If you are working on your credit score to help you
better qualify for a load you should be very careful with your credit card activity. When applying for a
credit card, banks take a look at your credit report. The results the bank receives from your credit report
determine the APR for your loan. Any unusual sudden activity like opening or closing a card could raise a
temporary red flag. If recent activity like opening or closing accounts or having open inactive accounts
has occurred you could end up going through extra steps in the loan process or get denied all together.
Make sure you look at your credit report and are aware of the statuses of any credit card accounts you
have when applying for any loan.
- Debt to credit ratio. Debt to credit ratio is amount of credit used compared to the amount
available credit. You’re debt to credit ratio is used in the calculation of your credit score. Using less
than 30% of your available balance and paying off the extra is a responsible way to maintain a good credit score.
Using your entire balance every moth shows that you are constantly in need of credit and may be irresponsible
with your finances.
Credit cards present a chance to compose monthly payments and institute a good record. High late fees and
penalties of late or missing payments should help motivate you to keep current with credit card payments.
If you can make stable payments on a restrained balance continually for a number of months your credit
score will reflect that you are a responsible credit card user. Responsible credit card use is very important
in establishing good credit and will make any action in your financial life much simpler.