The Right Way To Use Credit Cards
Credit cards are very common, and yet a lot of people think they’re a bad thing. Many individuals will say you should never get a credit card as they cause debt. On the contrary, credit cards can be very helpful in helping you pay for things while also building your credit score.
Furthermore, a credit card on its own doesn’t cause debt. Poor credit card usage is what causes debt. So, in this article, you will find some helpful tips to get you using credit cards the right way and avoiding debt:
Ensure You Have A Good Credit Limit
When you apply for a credit card, the company will do a background check and check your credit score to determine what your limit will be on that card. This credit limit is essentially just the maximum amount you can spend on your card without incurring fines. You can request a limit if you want, but it will only really be granted if you have a good credit score. Don’t worry if yours is bad, you can fix it, and there are companies like Sky Blue Credit that repair poor scores, so do that first. The reason you want a good credit limit is that it gives you plenty of money to use on your card. With a very low limit, you’re not going to see the true benefits of a credit card, and there’s more chance you max out your card with so little on there.
Don’t Treat It Like Additional Money
The reason most people end up in credit card debt is that they treat their card like it’s a second bank account which supplies them with more money. This isn’t the case, any money that you spend on your credit card will be paid for by your normal bank balance. The difference is, you pay for everything at the end of a billing period rather than have the money come out of your account all the time. So, during a month, you could use your card to pay for general expenses and see your normal bank balance not move at all.
This lures you into a false sense of security, and you start spending money from that balance too. Don’t do this! Use your regular account for direct debits and then pay for everything else on your credit card. This keeps your finances nicely balanced and ensures you don’t spend too much from each account.
Pay Your Balance In Full Every Month
The biggest mistake people make is they only pay the minimum charge on their credit card bill. Doing this will only result in the rest of your bill being attached to your next bill with interest. This is how people end up with massive credit card bills. Instead, pay your balance in full every month, and you’ll avoid all the interest fees.
The key is not getting carried away when you have a credit card. They aren’t magical cards full of free money, treat them with respect! Use them the right way, and they’ll have a positive impact on your finances.