Managing your credit cards can be tricky. Here are four easy steps to help you keep things in order!
The “how to use credit card smartly” is a guide that shows the steps you need to take in order to properly manage your credit cards.
Credit cards, out of all the financial instruments available, may elicit some of the most passionate reactions. Others consider them as nothing more than a deadly debt trap, while others see them as a valuable tool for safe shopping or even earning incentives on their transactions. But, whether you like them or not, one thing is certain: we’re all using them. According to Census Bureau statistics, more than 70% of American families use at least one credit card.
The answer to how advantageous a credit card may be comes down to how you utilize the product, not simply the product itself. Consumers who follow strict credit card management may enjoy all of the advantages of credit cards without getting into debt. The term “strict” is the key here, however.
Here are some pointers on how to use a credit card to enhance your life rather than to put you in debt:
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1. Use credit cards to supplement your budget.
One of the most serious issues with credit cards is when they are utilized as an emergency fund. Make no mistake: credit cards are a poor alternative for an emergency fund, even though they might be handy in an emergency. Using a credit card with a huge load that you won’t be able to pay off in a few months may swiftly transform convenience into costly debt.
Instead, think about combining credit cards with your budget. In other words, after you’ve established your monthly budget or spending plan, you may use your credit card to pay bills or make purchases that you’ve previously planned without going over your budget. You receive the credit-building advantages of credit cards while without the heavy debt (if you repay the statement balance in full each month).
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2. Make every effort to pay off the whole debt each month.
Paying down your credit card bill in full each month is the best way to remain out of debt without completely avoiding credit cards. This should be possible if you utilized your credit card in combination with your budget. If you use your credit card to augment your budget or as an emergency fund, this may be more difficult.
The grace period on most credit cards runs from the end of your billing cycle to the day your payment is due. (This usually only applies if you didn’t carry a debt over from the previous month; cash advances and balance transfers, for example, may not have a grace period at all.)
If you pay your debt in full within the grace period, you will not be charged any interest. Credit card providers are not compelled to provide this grace period, but the majority do. The statement must be given to you no later than 21 days before your payment is due, providing you adequate time to make the payment before the grace period expires.
At the absolute least, avoid making just the minimum payment if paying the amount in full each month becomes unaffordable. Minimum payments are often just 2% of your total (plus interest), so they won’t make a significant difference in your debt. Examine your credit card statement to discover how little the minimum payment is. There should be a chart showing how long it will take to pay off your amount if you merely make the minimum payment each month.
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3. Pay your payments on time every time.
All of that said, things happen, and you may find yourself unable to pay more than your minimal payment. If that’s the case, be sure to pay on time to prevent incurring late penalties. (While some credit card issuers waive the cost for the first late payment, many charge up to $39 for subsequent late payments.)
Aside from the fact that late fines may be costly, late payments can also harm your credit. Payment history ranks first in the credit scoring formulae of both main credit scoring organizations (FICO® and VantageScore®), and it only takes one late payment to lower your score. Even if you can’t keep yourself out of debt, always pay on time to safeguard your credit.
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4. Have a plan in place in case the balance becomes too much to manage.
If you’re only able to pay the bare minimum and don’t expect a change in the near future, it’s time to look into alternative choices.
Debt consolidation is one such option, and it entails paying off debt using a credit card or loan, hopefully at a reduced interest rate. If your credit is excellent enough to be accepted, consolidating debt may help you acquire low or no-interest credit for a short time, allowing you to make more progress toward paying off that entire sum.
A balance transfer credit card or a personal loan used to pay off debt are two options for debt consolidation. Balance transfer credit cards are appealing since they normally come with a no-interest promotional offer for a certain amount of time.
The disadvantage is that any leftover debt at the conclusion of that period will be charged at the card’s standard purchase interest rate, which might result in a large balance increase quickly. To prevent the increase, some individuals conduct another balance transfer immediately before it occurs, but a better option could be to pay more than the minimum in the amount you’d have to pay each month to be debt-free before the promotional offer ends.
Personal loans used to pay off a credit card, on the other hand, will incur interest but will have a set payback deadline. If you want to know when you’ll be out of debt and avoid getting into new credit card debt, this might be an appealing alternative.
Debt consolidation may help you pay off high-interest credit card debt in any case, but the advantages will only last if you don’t rack up extra debt in the meanwhile. The best method to stay out of credit card debt once you’ve paid off your combined debt is to pay down your bill in full every month.
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It’s all about developing excellent habits when it comes to credit card management.
Learning how to handle a credit card may seem to be a difficult task, but it actually boils down to developing good habits. You may enjoy the credit-building advantages of credit cards without going into debt after you become accustomed to utilizing your credit card in combination with your budget and paying your amount in full each month.
What if you find yourself in a situation where you need to use your credit card? Alternatively, do you have to carry a debt from month to month? Knowing when it’s time to consolidate your debt may save you from accumulating so much credit card debt that it becomes practically difficult to handle. Things happen, and the more you understand your alternatives, the better.
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The “how to manage your credit score” is a blog post that provides 4 easy steps to properly managing credit cards. The article also includes a list of things you should do in order to maintain a good credit score.
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