A credit card is like magic: it’s a free source of credit that can help you reach your goals faster than all the rest. But along with its several benefits comes the problem of spending more than you have. This is a bad practice that can quickly lead to a financial problem. If you are careful about how you use your credit card, it won’t hurt your credit score or get you into debt. Follow these mantras to get a better handle on how much you spend on your credit card:
Keep your credit card use to a minimum.
One credit card might give you cash back when you buy gas, while another might let you use an airport lounge. But if you have too many credit cards, it can be hard to keep track of your spending and give you bad dreams. So, the fairest object is to stick with one credit card that gives you the most benefits for the kinds of purchases you make most often. Even if you have more than one card, use the same one for most purchases and only use the other cards for certain things.
Credit limit and the rule of thirds
Not to be confused with the “rule of thumb” in photography, the average credit limit should only be used up to a third of the time. When you use more than 40% of your credit limit, it can hurt your credit score. With a debit card, you can keep this percentage between 30 and 40 percent.
On-time payment of the complete credit card bill
Paying your credit card account on time is best to keep your credit utilization ratio and interest charges low. This will make sure that your credit card bills don’t get out of hand. If you only pay the minimum due, your debts will keep adding up, making it harder for you to pay them off.
Setting spending alerts
When you set up spending alerts, you can see how you spend. You can set a limit on your credit limit or the amount of each transaction to make sure you don’t spend more than you planned. You can also turn on security alerts for the credit card that looks for suspicious spending patterns and let you know about them.
Postpone purchasing till you have a better disposition.
If you’re sad or down, it’s best to stop shopping until you feel better. The reason is that when people are upset, they often buy more than they need. So the next time you’re feeling down, it’s best not to go shopping.
Use it to buy things you were going to buy anyway.
When you use a credit card, it may feel like you are spending someone else’s money, but you will have to pay back the amount. If you buy something just because you can because you have enough credit, it will come back to bite you in 45 to 60 days. So, you should use a credit card to buy things you were going to buy anyway, no matter how you would pay for them.
Don’t forget your money goals.
Overspending will take you away from your financial goals for sure. To make sure that one moment doesn’t ruin weeks of hard work, you should make spending decisions that fit with your plans for the future. Asking yourself if what you want to buy will make it harder for you to reach your goals can stop you from buying things you don’t need.
Use the benefits of your credit card.
Most credit cards have perks that can help you save money. Find out which of your cards gives you more points when you buy groceries, which gives you more frequent flyer miles and more cash back on the things you buy most often. You can utilize credit cards to your benefit if you do these things.
Know how balance transfer’s work
Issuers of credit cards will continually look for new methods to entice clients. Balance transfers with no interest are a popular way to do this. But this is a special offer, and the 0% interest is only good for the offer period, which is usually six months.
After six months, the interest on the balance amount is the same as the interest on the regular balance. If the interest rate on the new card is higher, the interest on the transferred balance will be higher if it isn’t paid off during the interest-free period.
Also, a person’s credit score will be affected if they use more than 30% of their total available credit. The best feature is to move the balance to a card that has never had a balance and repay it within six months. By doing this, a lot of money can be saved on fees and interest.
