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When used correctly, a credit card can be an incredibly useful tool for everyday finances. But with many people, especially young adults, avoiding credit in favor of debit can result in long-term wealth plans being unwittingly affected.

Your financial life can be benefited by credit cards, so long as you know exactly how to use them and what to avoid. For example, if you can use these cards well and build up your credit score, you can reduce the interest rates you’ll pay when you’re buying bigger items, such as a car or house. There are also a number of rewards available with credit cards (see Upgraded Points to learn more), including frequent flyer miles and cash back rebates, which adds much more value to your spending. And, at a time when hacking is a huge concern, credit cards can provide you with a lot more security than a standard debit card.

In contrast, credit cards that are misused can cause some serious damage, sinking you into debt and affecting your ability to borrow cheaply, if at all, in the future. One bad mistake with your credit card and you could be paying for it for years.

So, to make the most out of your credit card(s), here are some top do’s and don’ts:

Don’t Pick a Card at Random

Choosing a credit card isn’t something that should be done at random. It takes some thought and understanding as to what you’re looking for from your credit card. Do you want to build up some air miles or get some cash back? Or are you looking to purchase a big ticket item?

There are so many options out there, which is why you need to understand what’s involved in each of these and which are going to benefit your wallet the most.

Do Look at Your Credit History

It goes without saying that the best rewards and terms are going to be offered to those who’ve got the best credit. That’s why you need to know how a credit card issuer is going to view your credit history before you go ahead with the application. And the good news is, you can find out exactly what your credit history is like by using one of the three credit bureaus – Equifax, Transunion or Experian. You’re entitled to a free credit report from each of these every year.

When you get your report it’s important to check for any errors before contacting the credit bureau to get them removed because any bad marks against your name could negatively affect your credit card options.

By familiarizing yourself with your credit rating, it will help you to find the right card for you. For example, if you do find that your credit rating isn’t great, you can choose a card that’s aimed at people who are trying to build up their rating because they have a low score.

Don’t Miss Your Monthly Payments

Each card will come with a monthly statement with a minimum amount that you’ll need to pay. Even though it’s better to clear your balance at once so you don’t have anything remaining, it’s better to pay the minimum than nothing at all. Missing your monthly repayments is often where debt can spiral out of control as you’ll be presented with late payment fees (these are usually around $35) which could ultimately affect your credit score.

Don’t forget, your payment history makes up for 35% of your FICO score so make sure you’re always aware of when the repayment needs making. If you do have difficulty remembering when your payment date is, alter this with your credit card issuer to a memorable date so you don’t miss any future ones. And if you do miss one – ask for a redress.

Do Look at Balance Transfers if You’re Struggling with Your Payments

Credit card debts can affect anyone, regardless of how much they’re earning but don’t just bury your head in the sand if your debt is building. Instead, look at cards that offer good balance transfer options and will allow you to move your existing credit card debt over to a new one. Some cards will offer you 0% balance transfer options for a certain period of time, which will give you a bit of breathing space on your repayments, allowing you to get the cash together to start paying your debts off.

Don’t Spend Everything at Once

When you’re issued a credit card it can be tempting to splash all of the cash you’ve been given at once but this is a huge mistake that a lot of people make. Try to keep yourself within 20-30% of your credit limit because issuers don’t like people who are maxing their cards out each month, even if they are paying these amounts off each month.

Why don’t you try using your card for monthly bills, e.g. cell phone bills, especially if you think you might be tempted to spend too much at once?

Zoe Crooksen is a personal finance consultant who works with her individual clients to get them out of debt and spending responsively. Her articles can cover a broad range of financial topics.

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