Many people don’t have a healthy relationship with money and have trouble budgeting and saving. Yet those are the very skills we need in order to take care of ourselves financially and be responsible with the credit cards. Here are our top tips on how to handle credit cards and raise your credit score.
Find the Right Card
Not all credit cards are created equal. We are offered varying degrees of limits, interest rates, and benefits (like travel miles or gasoline discounts). It can be difficult trying to figure out if your current credit card is working for your benefit or if you need to find the right one for you. Websites like CreditSoup are fantastic for digging through the offers and information available about different cards. You can comparison shop over a variety of cards or you can be matched up with the right card for you based on your credit score. Have bad credit? No worries, you can still get a card! In cases of bad credit there are cards called “unsecure credit cards” in which you pay the upfront limit, which is often low, and start your venture into the credit card world. This doesn’t always appeal to people, but if you are setting out to improve your credit score, this is a great way to start without a huge limit that can entice you.
Charge Very Little
Credit cards are not extra money in your pocket. Anything you charge to the card should be something you can already afford and pay off each month. It’s often recommended that to improve your credit score, you charge one thing a month to the card. Something small like your Netflix account or a power bill. It’s something that is already in your budget and doesn’t add to any financial stress. Some people have credit cards on hand for emergencies. Emergencies happen and you may find yourself in need of using the card. This is perfectly acceptable! Just remember that huge sale at the mall does not count as an emergency.
Pay Your Balance Each Month
When you receive the statement, pay close attention to how much you charged that month, how much the minimum payment is, and when it’s due. On the due date, pay the entire amount you charged for the month. If you pay it late, you will owe interest and a late fee. If you pay the balance in full, you avoid paying any interest. If you pay the minimum payment due, you are going to be paying interest which translates into more money than what you originally spent. When it comes to interest rates, as long as you are paying on time each month and in full, it doesn’t matter what interest rate the card offered you because you won’t have to pay. This is good news for those with high interest rates because in the future you can transfer to a card with a much lower interest rate.
How to Pay Off Big Debt
If you used your card for an emergency and are now faced with the inability to pay off the full balance, no worries! It’s possible to pay this off with very little damage to your credit score. Ultimately, make at least the minimum payment each month, but aim to pay more. This does incur the interest but an on time payment of the minimum that is due will help your credit score, rather than hurt it. Any month that you are able, pay more than the minimum. We recommend paying two times as much that is due, but anything over the minimum is helpful. Why? The minimum due goes to pay off interest first and the rest goes to principal. Anything over the minimum will go to the principal and lower interest owed in future months and pay off the debt quicker.
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