How to be smart with your credit cards
Although some experts say that credit card debt is a financial four-letter word and should be avoided at all costs, others agree that the availability of credit can be a great compliment to a strategic financial strategy. Used responsibility and within the guidelines of your budget, credit cards can help you more effectively manage you purchases and your cash flow at the same time.
Among those who utilize credit cards and still manage to stay out of debt, there is a common thread of behaviors and attitudes that seem to fuel their money management success. If you’re interested in cultivating a healthier relationship with your Visa or Mastercard, consider these tried and true practices of smart spenders:
Use fewer credit cards
How many of us have more than one credit card? The vast majority of people would confess to having two, three, or four, and all would have an outstanding balance. The smarter approach is to use one or maybe two cards, and avoid spreading your spending across multiple accounts. It’s difficult to track, and while each card individually appears as if the balance is manageable, their combined total quietly inches toward budget breaking.
Pay the balances in full
Smart spenders recognize the hidden cost of credit card debt. If you’re monitoring your spending and keeping it in line with your monthly budget, you should be able to pay the outstanding balance in full every month. If not, your interest begins to compound, and your debt starts to grow exponentially. Your revolving debt also negatively impacts your credit score.
Pay your bill on time
When your payment is late, you’re charged interest and also a pretty hefty late fee. Smart spenders know the importance of on-time payments and how it can be accomplished through organization. While you may not be mailing a payment, you’ll still need to allow time for online payments to be processed so don’t wait until the last minute. On-time payments also contribute to a higher credit score.
Smart spenders understand that some expenses require more of your monthly budget, so you’ll need to plan for in advance; car repairs, home maintenance, property taxes, even holiday gifts, for example. Their budget includes saving for both expected and unexpected financial events, so they’ll have the funds, regardless of the increased financial obligations for a particular month.
Use credit card rewards to your advantage
Today, credit cards offer a host of promotions in order to gain your business. Whether it’s miles, points, rebates, or cash back, there are many to choose among. Smart spenders use the credit card that offers the most valuable reward and one that they can use to their advantage.
Credit cards can help build your credit worthiness as easily as they can destroy it. Use these tips to keep your budget in line and your debt under control while you create a stellar credit history.