Most people have at least one credit card in their wallet, but if you ask them to explain the basics of credit card management, most can’t provide a response – at least not a good response.
The truth is, many people don’t know the first thing about responsible credit card use. This likely explain why so many people carry huge credit card balances. Understand, however, that the way you manage your credit cards has a huge bearing on your credit score.
What smart credit card habits should you adopt?
Pay balances in full
There are really no benefits of carrying a balance from month-to-month. Yes, credit cards offer this convenience. If you get hit with an unexpected bill, the ability to pay off the charge over several months is a godsend. However, you shouldn’t start a habit of carrying your balance from month-to-month.
The majority of credit cards charge interest, and when you carry a balance, this increases how much you owe in interest. The better approach: charge only what you can afford, and then pay off your balance in full each month. This saves on interest, plus it’s a key way to avoid debt.
Check your statement carefully
Credit card companies make mistakes. Plus, a scammer may get a hold of your credit card number and make unauthorized charges. Your credit card company may pick up on fraud before you do, still, it’s important that you examine each credit card statement for accuracy. If you detect unauthorized transactions, contact your credit card company immediately.
Consider debt consolidation
If you have multiple credit cards with high balances, and you can’t keep up with your minimum payments, consider whether a debt consolidation makes sense. Consolidation doesn’t erase your balances, but it’s a practical way to gain control over your finances and eliminate debt faster.
There are different ways to consolidate credit card debt. Some people borrow against their equity to pay off debt, whereas others apply for a low-rate credit card and transfer their balances. If neither is an option, a debt consolidation agency might be the answer. These professionals have the know-how to negotiate a better interest rate and lower payment with your creditors, and once you’re on a plan, you can typically pay off your credit cards in about five years.
Ask for a lower interest rate
The higher your credit card interest rate, the harder it is to pay down the balance. But there’s a way to tackle this. Look at your credit card statement, see how much you’re paying and then call your creditors and request a lower rate. For a credit card, a low rate is typically anything under 10%. Understand that credit card companies are choosy, and not all account holders qualify for a better rate. However, there’s a good chance that you’ll snag a lower rate if you always pay your bills on time and maintain a reasonable level debt.
Some people avoid credit cards like the plague because they don’t want debt. To each his own. Just know that credit cards are extremely practical and safe, as long as you understand how to use them responsibly.