Obtaining and using a credit card is a privilege, not a right.
Many individuals treat credit cards as an inherent birthright as a consumer, charging hundreds or even thousands of dollars a month and treating the loans like free money.
However, just like the privilege of credit card use can be given, it can be taken away. In order for your permanent credit history to remain shiny and untarnished, here are some prudent “Do’s” and “Don’ts” of credit card usage:
What you should DO with your credit card
- Choose a credit card that’s right for you. Depending on your credit rating, you have the ability to choose a credit card that works for you. Look for companies that offer “rewards” credit cards and no annual fee. These types of offers make it easy and cheap to use credit cards, and they may even end up paying you to use their credit cards.
- Pay on time. This cannot be said enough. Always make a payment on or before the due date. Late payments will affect your credit report and score.
- Pay more than the minimum due. The best strategy is to pay your credit card balances in full each month. If that’s not possible, always pay more than the minimum amount due. You could spend years and hundreds of dollars in interest charges paying off credit card balances with only minimum payments.
- Keep track of charges. You should keep your receipts so you know how much you have charged on your credit card. Not only does this help you stay within your budget, but it prevents you from making errant charges over your credit limit.
- Check your credit report at least once a year. This is important to keeping a strong credit score. You are entitled to a free credit report from all three credit reporting agencies every year. Take advantage of these reports and make sure that your credit is not being taken advantage of by anyone else.
- If you get into financial trouble, talk to your creditors. When financial obstacles appear, it is always best to talk to your creditors about your financial situation. If you fail to pay, with no word from you, it appears to the credit issuer that you are dodging them. Creditors are almost always willing to work with you through financial crisis.
DON’T make these credit card mistakes:
- Make a late payment. Again, the detriment of a late payment cannot be reiterated enough. Pay on time every time.
- Charge more than your credit limit. Try to keep your credit card account balance below 30% of the credit limit. This helps your credit score and shows other potential creditors that you are able to manage credit effectively.
- Charge more than you can afford to pay. One good motto is: “if you can’t afford to pay it in cash, don’t charge it.” Always keep in mind what you can afford to pay at the end of the month when your statement arrives. If it takes longer than three months to pay off, don’t charge it.
Write to Grace Carter at grace@creditdonkey.com
