Credit cards are the bane of existence for some people. I understand it, I once had a bad relationship with credit cards that landed me deep in trouble. Credit cards can be of a benefit to you if you learn how to use them to boost your credit score. Boosting your credit score is wonderful as you can get lower interest rates. Future credit cards and loans will be easier to manage.
Simplify Your Use
It is easy to just whip out a credit card and pay with it, rather than a debit card or writing a check (yes, some people still write checks). Credit scores take into consideration how much credit you use vs how much income you receive. You should never use your credit card to pay all your bills. The best thing to do is pick one or two recurring charges, let’s say Netflix and Hulu subscriptions. They are low-cost items that do not take up much credit at all.
Always Pay In Full On Time
You want to be sure that you pay the entire balance on time. Paying the balance by the due date shows consistency in your ability to pay off your debts. It will also raise your credit score with consistent payment. It also saves a ton on interest. Your small monthly payment allows for interest to apply to the remaining balance. That means you are paying more for your Netflix and Hulu than you need to. The goal is to never pay interest. Some people make a payment immediately after using their card. The unfortunate thing is that it hurts more than helps. Those small payments may not show up during a billing cycle. It won’t show timely payments on your behalf, it will look like you haven’t used your card at all. Not using your credit is not helpful.
What To Do When Your Score Is Low
If your score is low and you have been making small payments, the first thing to do is to stop using the card altogether. Don’t use it again until the entire balance is zero. If you can, pay a little more than the monthly amount, each month. The extra goes towards the principal rather than the interest. Lowering your principal will lower how much you owe in interest. It is ideal if you can pay twice the payment each month.
If your score is low, you don’t have a card, and you want to get a card, you will need to find a way to boost your score. One popular method is to ask a family member with good credit for a little help. They can add you to their credit card account and never give you a card to use. You ride on their good credit and watch your score rise through them. It is an excellent tool to use if you have no credit score either.
Credit cards are not “extra money”, it’s borrowed money that you have to pay back. Once you can train yourself to think in this manner, the easier it will be to manage your credit cards.