Using Your Credit Card the Right Way
By now, you’ve probably heard plenty of horror stories about people who have misused their credit cards. New card owners usually lack the responsibility needed to properly manage their credit card accounts, so they end up in debt very quickly. You can avoid this problem by learning how to use your card the right way and develop good money management habits from the start.
Step 1 – Know Your Credit Limits
It is important to know how much money you have available to spend on your card at all times. Not only does this give you a budget to stick to, but it ensures that you don’t get an embarrassing decline notice at a store or restaurant. When you first get your card you should have a full line of available credit to use. However, if your card charges an annual or monthly fee, that money may have already been taken out of the card’s balance.
To check what’s available, you can either call your credit card company, check your most recent billing statement (if it is up-to-date) or view your account online. You may also keep a running log of your purchases and compare them to your overall credit limit. This is recommended regardless of whether or not you need to know your available balance.
Step 2 – Know Your Personal Limits
Just because you have money available doesn’t mean you have to spend it. You should only put charges on your card that you can logically pay back that month. Some cardholders justify a purchase by saying they’ll pay for it “eventually.” That’s how debt happens. You need to have a clear timeframe for your payback so you can keep your debt low to none. If you can’t afford something right now and can live without it, don’t get it.
Step 3 – Have the Money Ready
In an ideal situation, you should already have the money for a purchase before using your credit card to buy it. What’s the point of the card then? To build up your credit score. Every time you make a payment toward your credit card, you get a positive mark on your credit report. This will help you get loans and other future cards.
Using a credit card also prevents you from giving out your bank account information if you don’t like to pay in cash. This extra convenience will minimize the amount of items in your wallet and it will protect you if your card is ever lost or stolen. Simply report the card to the credit card company, and they will issue you a new one with a new number.