Credit cards have become a staple in the lives of millions of people worldwide, providing a convenient way to make purchases and manage finances. However, with this convenience comes responsibility, and it is important to understand the dos and don’ts of using credit cards to avoid financial pitfalls. In this article, we will explore the top credit card dos and don’ts, and provide tips on how to make the most of your credit card without incurring unnecessary debt.
DO: Pay your bill on time
One of the most important credit card dos is to make sure you pay your bill on time every month. Late payments can result in costly fees and penalty interest rates, which can quickly add up and lead to debt. Additionally, late payments can negatively impact your credit score, making it harder to secure loans, mortgages, and even employment in the future.
To avoid late payments, set up automatic payments or reminders to ensure you never miss a due date. If you’re struggling to make your payments, reach out to your credit card company and discuss payment options or payment plans.
DO: Keep your credit utilization low
Credit utilization refers to the amount of credit you’re using compared to your credit limit. Keeping your credit utilization low is another important credit card do, as it can help improve your credit score and prevent debt.
Experts recommend keeping your credit utilization below 30% of your available credit limit. For example, if you have a credit limit of $10,000, you should aim to keep your balance below $3,000. If you do need to make a large purchase that will put you over this threshold, consider paying off the balance as soon as possible to avoid accruing interest and fees.
DO: Use your rewards wisely
Many credit cards offer rewards programs that allow you to earn cash back, points, or miles for every dollar you spend. Using your rewards wisely is a great credit card do, as it can help you save money or earn valuable perks.
To make the most of your rewards, consider using them for purchases you would make anyway, such as groceries or gas. You can also save up your rewards for larger purchases, such as travel or electronics, to maximize their value. Be sure to check the expiration dates and terms of your rewards program to avoid losing out on any earned rewards.
DO: Monitor your account activity
Another important credit card do is to monitor your account activity regularly. Keeping an eye on your transactions can help you catch fraudulent charges or errors, and ensure that you’re staying within your budget.
Most credit card companies offer online or mobile banking, which makes it easy to track your account activity and receive alerts for suspicious or unusual charges. If you do notice any fraudulent charges or errors, contact your credit card company immediately to report them and protect your account.
DON’T: Carry a balance
One of the biggest credit card don’ts is carrying a balance from month to month. Doing so can result in interest charges and fees that can quickly spiral out of control, leading to debt and financial hardship.
To avoid carrying a balance, try to pay off your credit card bill in full every month. If you do need to carry a balance, make sure to pay more than the minimum payment to reduce the amount of interest you’ll accrue.
DON’T: Use your card for cash advances
Using your credit card for cash advances is another credit card don’t. Cash advances typically come with high fees and interest rates, making them a costly way to access cash.
If you need cash, consider using a debit card or withdrawing money from an ATM instead. If you do need to use a cash advance, make sure to pay it off as soon as possible to avoid accruing additional fees and interest.