Savvy credit card use generally takes making some mistakes to really know what you are doing. Here are a couple of tips if you are just starting out, or what to improve your use of credit cards. Below are the basic rules as I see them.
* If you can’t use credit cards responsibly, then don’t use them.
* Never carry a balance. Just don’t do it. The only exception would be in an arbitrage situation when using a zero interest credit card with very good management of it.
* If you are going to use credit cards, then find one with a very good rewards system and stick with one card. Using multiple cards just makes your financial management that much harder and makes it so your rewards don’t go as far when spread around.
* Ditch the store credit cards. They just aren’t worth it. Shopping only during sale times will save you any discount you might get from a card and not add one more item to your financial management.
* Call to request a lower interest rate. You might as well have this for a safe guard if you do happen to slip up.
* While putting everything on auto pilot can be tempting, don’t let this be an excuse for lax monitoring.
* If you have an automatic payment for the full balance, then make sure that the funds are where you need them when the due date comes around.
* It’s also good to put your payment date on your calendar or some system like that.
* Take a look at least once a month for any charges that might not be yours. Fraud can be a tricky thing to get rid of, so it’s best to catch it early.
* Cancel unused cards. While your FICO score is based on a variety of different factors, keeping a bunch of unused cards (especially store merchants) does you no good. Keep in mind that if you are planning to take out a mortgage in the immediate future it isn’t wise to close a bunch of accounts at the same time in hopes of boosting your score, as it will do the opposite. Start with closing your newest accounts, as these look the least favorable on your credit rating.
* Check your credit report annually, it’s free! Take the time then to cancel anything you aren’t actively using.
We’d love to hear from our readers if they have additional tips!
Best,
Miel
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