Credit cards are convenient to carry and use, but exercising them in an unwise manner can come at a big cost—a cost that’s not always worth the bottom dollar. It’s easy to get swept away in a habit of swipe now, pay later, and as a result, digging a money hole can happen faster than you think.
On top of that, credit scores have a huge impact on daily living. A low score can hinder your ability to move in to a new apartment, your eligibility for a loan or even your ability to qualify for a new or additional credit card. Understanding how to best use a credit card really will make a difference in your finances, the credit you build, and as a result, your credit score.
Karen Owens, vice president of marketing at First Credit Union, says that it’s important to understand the basics about credit cards. She broke down key points that are easy to put into daily practice, but before you go ahead and swipe the plastic, make sure you know all the terms about your credit card.
“Read the fine print. Seriously. Read the terms and conditions when applying for a credit card or any loan,” Owens says. “It’s important you understand what’s going on, and if you don’t, ask questions.”
Once you’ve read through the fine print, make a financial spending plan. There’s a saying that aptly captures the theme of making a plan first: “Fail to plan. Plan to fail.” So do yourself a favor, and make some type of plan and commitment.
“Only charge what you can afford to pay off in full each month,” she says. “Try just using your credit card for items you would normally purchase with cash, such as gas or food, so you’re able to pay your balance in full each month. Not only could this practice help you avoid long-term debt, but it could also help you build your credit score.”
Yes, it may sound like no-brainer advice, but sticking to not swiping more times than you can afford will allow you the opportunity to not only pay the balance in full each month, but it doing so will help you to feel in control of your money and empowered to stick to what your commitments.
The follow-up step when making a credit card plan is to set up automated payments to make certain that when you credit card bill due date nears, the bill will be paid no matter whether you remember or not.
“Making your payments on time is important, and it plays a big role in determining your credit score,” Owens says. “Use your bank or credit union’s bill pay service or set up an automated payment with your credit card company to help ensure you don’t miss a payment.”
First Credit Union, 1232 E. Baseline Road, Tempe, 480.831.2645, firstcu.net