Credit cards are one of the most crucial factors in building a long-term credit history and setting yourself up with a solid foundation for future investments like a vehicle or a home. Used wisely, they can open up many doors in life that otherwise would not have been available. So what are the best ways to use your credit card? Here are some tips to show you how.
Use Your Credit Card Only for Things You Really Need
When buying on credit, you want to ensure that every purchase is something you would have bought anyway. That way you don’t overextend yourself with a loan you can’t pay off.
Pay Off the Balance Every Month and Don’t Miss Payments
The best way to accomplish timely payments is to use your line of credit in the same way you might use a debit card. Pay for things like groceries and gas and then pay it all off at once or with every paycheck as soon as your receive it. It can be tempting to just make the minimum payment every month, but this is a surefire way to get caught in a debt loop. In fact, sometimes you may feel like you cannot make a payment at all, which is definitely a mistake. Whatever you do, make sure you are paying off as much on your credit card as you can every month.
Get a Rewards Card
Rewards cards are the most effective to build good credit because they reward you simply for using them. You can rack up points for travel or even cash back bonuses that you can, in turn, use to pay off any existing balance.
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Use an App or Excel Sheet to Track Spending
There are many finance apps that you can find that help you keep track of where your money is going to ensure that you don’t get in over your head with your credit card. Limit yourself to a reasonable credit limit and then stick to a budget to maintain a healthy credit history.
Keep in Mind Your Utilization Ratio
Utilization Ratios take into account all of your open loans and lines of credit and creates a ratio of how much credit you are using. If you have $1,000 of credit and you use $300, then you are in the average range of utilization, which looks good on your credit score. Any more than that and you might be risking a bad credit rating or even an inability to pay off the loan.
Credit cards are an essential part of building a healthy credit history and these tips are the best way to get the most bang for your buck.