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To help you manage your finances, we’ve asked eight experts to share their best credit card tips.
1. Sign up for multiple cards and use a rewards program from one of them every month
2. Look at the promotional offers before deciding which card to apply for, as there are often better deals than what’s advertised
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Whether you use a personal or commercial credit card, credit cards are effective instruments for obtaining financing and developing your credit profile. However, if you use them recklessly, they might have a negative influence on your credit score and debt levels. Avoiding frequent mistakes and getting the most out of your credit cards may be as simple as focusing on these expert-approved credit card recommendations, such as making regular monthly payments.
This article will teach you about credit cards.
- Pay your bills on a monthly basis.
- Make a budget and stick to it. Don’t go above 30% of your budget.
- Use a rewards card that corresponds to your purchasing patterns.
- Make the most of interest-free financing opportunities.
- Prioritize paying off high-interest credit cards.
- Cash advances should be avoided.
- Before you apply, check your credit score.
- Report a lost or stolen credit card right away.
1. Pay your bills on a monthly basis.
I always encourage paying your monthly payment in full as a credit card expert who has not only examined hundreds of cards on the market but also owns a suite of cards. Because credit cards might seem like free money, it’s understandable that it’s tempting to spend recklessly. That is not the case, though. Unpaid balances may rapidly accrue interest charges, sending you plunging into a debt trap that will contribute to the $1.08 trillion in credit card debt in the United States.
Trust me when I tell that getting out of credit card debt is neither enjoyable nor simple. You should avoid the negative practices that led to the credit card debt of 55 percent of Americans, such as ignoring your monthly statement and carrying sums from one payment period to the next.
2. Set a Budget & Spend Less Than 30% of Your Limit
Don’t get me wrong: having a credit card with a high credit limit might tempt you to spend more than you can afford. However, spending money you don’t have is a quick way to plunge yourself into debt. Instead, make a budget that you can stick to and try to spend less than 30% of your credit limit. Maintaining a low credit usage ratio will not only make your bill reasonable, but it will also help you enhance your credit score.
The amount of credit you’re using relative to your entire available credit limit, which may be computed per card or for all of your cards. A good ratio usually falls between 0% and 30%.
Fortunately, Americans using credit cards spend less than 30% of their credit limit on average. According to Experian, the average credit card amount was $6,194 in Q2 2019, while the average credit card limit was $31,015. This suggests that cardholders in the United States had a credit use ratio of about 20% – $6,194 divided by $31,015. This level of ratio will assist you in maintaining a decent credit score, increasing your chances of acceptance, and keeping your credit card payment within your means.
3. Make Use of Credit Card Benefits
While credit cards may allow you access monies you don’t have in your bank account, they can also be used to earn rewards on ordinary purchases. Most cards have incentive systems in place to encourage you to use your card, which 79 percent of cardholders think is the most appealing aspect of their preferred cards. On expenditures like groceries, petrol, US streaming services, and travel costs, you may earn up to 5%, sometimes even more, depending on the card.
To optimize your benefits, pick a card that gives incentives in spending areas that correspond with your behaviors. If you spend a lot of money in one area, such as grocery, for example, select a card that offers more attractive benefits in that category. Choose a card that provides a set rate, such as limitless 1.5 percent cash back or 1 point every $1 spent, if your costs fluctuate across numerous categories.
4. Make the most of interest-free financing opportunities.
Credit cards not only enable you to borrow money and receive rewards, but some even lure you with initial interest-free financing or 0% annual percentage rate (APR) deals that may help you pay off your debt faster. This means you may carry over your amounts from one billing cycle to the next without incurring interest throughout the promotional period. Purchases, debt transfers, or both are eligible for these 0% APR incentives, which may last up to 21 months.
If you need assistance financing a bigger purchase or consolidating debt from other high-interest credit cards, this piece of credit card advice may be incredibly helpful. If you know you’ll need this amount of money, make sure you just look at cards that provide a deal that fits your requirements. Make careful to pay off your debt before the promotional period expires and the continuing APR kicks in.
5. Prioritize paying off high-interest credit cards.
If you have many credit cards that are accumulating up debt, it’s critical to pay off the ones with the highest interest rates first. As you attempt to pay off your debt, this will usually enable you to save the most money. The longer you wait for the high interest to accumulate, the more money you’ll have to spend. While the average credit card interest rate is 16.03 percent, it may go as high as 25%.
Other than focusing on your high-interest cards first, there are other strategies to save money. If you’re considering getting a new credit card, seek for one that offers interest-free financing on balance transfers. This allows you to consolidate all of your old debt onto a new card with a 0% APR for a longer period of time, often up to 21 months. You’ll be able to repay those sums over time without incurring interest, but issuers will almost certainly levy a balance transfer fee of 3% to 5%.
6. Cash advances should be avoided.
Although credit cards enable you to obtain a cash advance or withdraw cash from an ATM using your card, the cost is substantially more than an usual card transaction. I don’t advocate utilizing your credit card to take money from your bank account unless you have an immediate need for cash. In fact, they’re so pricey that I’d never use this credit card option.
As an illustration of the financial harm that cash advances may create, consider the following scenario. Cash advances, according to CreditCards.com, have an average APR of 24.80% that is applied instantly, and often include a flat-rate charge of 10% or $5, whichever is larger. If you withdraw $100, for example, you’ll be charged $24.80 in interest plus $10 in flat-rate costs. This implies that for a $100 withdrawal, you’ll owe $134.80 on your bill.
7. Before you apply, check your credit score.
Applying for a credit card without first checking your credit score is a dangerous decision since you could not qualify. Issuers normally do a hard credit check when you apply, which may lower your score by up to five points and remain on your credit record for two years. Knowing whether or not you qualify for a card may help you avoid submitting several applications and, as a result, minimize the amount of hard credit inquiries on your report, so protecting your credit score from serious hazards.
A personal credit score of at least 640, which FICO deems to be an excellent score, is required for most cards. Furthermore, according to Experian, the average credit score in the United States in Q2 2019 was 703, which means that if you fall into that category, you should be eligible for a variety of credit cards. Several different issuers will let you check your credit score for free. Furthermore, there’s no need to be concerned about harming your credit score since monitoring your score involves a light credit inquiry, which has no negative consequences.
While my long experience has taught me the value of knowing your credit score before applying for a credit card, I’m not the only expert who believes this. My Experian colleague agrees with this piece of advise.
Before asking for credit, it’s critical to verify both your credit record and credit score. Knowing your credit score ahead of time can help you predict how likely you are to be approved for credit. A higher credit score increases your chances of getting credit on better conditions.
You may also see if there are any things you can do to improve your credit score, such as paying off any debt. Understanding your credit score and how your credit report influences it provides you more control over the application process. You’ll be able to deal with any problems right away.
—Experian’s Senior Director of Consumer Education and Advocacy, Rod Griffin
8. Report a lost or stolen credit card right away.
Despite the fact that there were 246,763 incidents of credit card fraud tied to new accounts in 2019, you may still be a victim of fraud if you lose or misplace a card. If this occurs to you, it’s critical that you notify your provider as soon as possible. Most issuers make this procedure as easy as possible by allowing you to freeze or replace a lost card using their mobile app. If you don’t have this option for whatever reason, contact your bank immediately to prevent credit card theft.
Conclusion
Following credit card guidance may help you maximize the advantages of your card, prevent credit card blunders, and take advantage of the extra cash that comes with it. You may expect to increase or grow your credit score, acquire greater credit limits, and even construct a credit history that will help you qualify for future financial goods if you get a card and use it wisely.
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