The concept behind credit cards is a simple one: charge now, pay later. Yet every year, so many people find themselves falling behind on payments or in extreme debt due to poor financial planning, high interest rates, and unexpected fees. Stay out of trouble and maximize the benefits of your credit card by adhering to the following do’s and don’ts of credit card usage.
DON’T: Charge Items You Can’t Afford
Just because you can charge a new entertainment system or pair of shoes to your credit card doesn’t mean you should. Maxing out your card makes it harder to meet monthly payments, lowers your credit rating, and in many cases increases your default interest rates. Estimate your monthly income and household expenses so that you know how much you can realistically charge each month. Knowing your limits will help you fight the temptation to charge something you can’t afford.
DON’T: Lose Track of Your Card—Or Your Spending
Monitoring your card closely will help safeguard against credit fraud and reduce any clerical errors on your account. Save receipts from all your charges to compare with your statement, and promptly correct any discrepancies with your provider. To protect yourself from fraud, cancel any cards that have been lost or stolen or that you haven’t used in the past 6 months. Make sure you order your credit report annually and review it for accuracy as well as suspicious activity.
DON’T: Miss Payment Deadlines or Make Minimum-Only Payments
Once you make a credit card purchase, don’t forget to hold up your end of the bargain: paying off your debt. Failing to make payments on your credit card will cause you to incur additional fees and damage your credit rating. Set up an automatic bill pay through your online banking system to make sure you don’t miss important deadlines.
As a general rule, pay off as much debt as you can each month. While making minimum-only payments may be tempting, you’ll end up spending much more money than what you originally charged to your card.
DO: View Your Credit Card as a Way to Improve Your Credit Rating
Let’s face it—your credit history plays a role in determining everything from your eligibility for a loan to your mortgage rate. Building a good credit score often entails meeting payment deadlines, limiting the amount of cards you have, and containing your debt levels to half your credit card limit. Managing your finances sensibly now will pay off when it comes to making those important long-term investments and purchases.
DO: Take Advantage of Your Perks and Rewards
Most credit cards come with certain added bonuses—points, cash back, purchase protection, mileage and/or traveller’s insurance and assistance. Read up on the programs your provider offers to optimize your credit card usage, and rack up points by making payments on-time and in full.
DO: Compare Providers to Find the Right Card for You
Your mailbox is inundated with new credit card offers on a weekly basis, each promising you a different promotion or deal. One of the best ways to weigh the pros and cons of each provider is to use a free comparison service for credit cards. A comparison service will give you impartial information to help you find the card that’s right for you.
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