Five things you’ve got to do if you have a credit card
Establishing and managing good credit is an important responsibility in today’s world. Especially since your credit rating—that 3-digit number that defines your credit worthiness- depends on it. There are several factors that impact your credit rating, one of which is your credit card activity. We’ve come up with five best practices when tempted by the love of plastic money:
1. Watch your credit limit
Did you know that credit card companies start to monitor any account with a balance that’s more than 40% of the credit limit? Experts recommend keeping credit card utilization below 30 percent on each card and collectively. This shows lenders that you know how to spend responsibly and this can help raise your credit score. Anything more than that and it could indicate that you’re struggling financially and lenders might worry that you’ll have trouble paying it back.
2. Make your payments on time
If you’re late just one time, call the customer service representative and kindly ask if they’ll waive the late fee. If you’ve historically paid on time, they may do it as a courtesy. If you’re habitually late, it will cost you. Making your monthly payment on time impacts your credit rating, your interest rate, any promotions the company offers, and more.
We all slip up now and again, though. If you miss a payment, make it as quickly as possible because the amount of time really does matter. Paying five days late is better than paying 30 days late so act quickly—and then maybe think about signing up for auto pay.
3. Pay off your monthly balances in full
Paying off your monthly balance in full each month builds a practice of excellent credit habits. It will help to avoid late payments, unnecessary finance charges, and the accumulation of unnecessary debt. It will also benefit your credit score and keep your credit utilization ratio in check, which is an important factor in the calculation of your credit rating.
4. Open your statements!
Even if you pay your bills online, it’s important to view the activity on your monthly statements. Is there a random charge you didn’t authorize? Maybe a monthly subscription that you didn’t realize you agreed to? Has your payment due date changed? Is a promotional date ending or has there been a change in your interest rate or fees? Your statement includes lots of valuable information, much of which impacts your finances, so take a few minutes and read it carefully. We’re hoping not, but you may be surprised at what you find.
5. Store the customer service number, just in case
If your card is ever missing or stolen, the first thing you’ll need to do is report it to the credit card company so a hold can be put on the account. Without the physical card, however, you won’t have the customer service number. Write down the credit card name and customer service phone number now and keep it handy. If you choose to copy the credit card number, plan to put it in a safe place where it’s not easily accessible to just anyone.