In today’s world, it is essential to know how to use your credit cards wisely. When done correctly, using credit cards can help you build or rebuild your credit in difficult times. A good credit score can help you in so many ways, including renting an apartment, applying for a job, buying a new car, financing an amazing vacation, and even buying a house. But using credit cards can also drive you into debt or even bankruptcy when you do so incorrectly. When you are responsible, educated, and aware, it is easy to improve your credit score while using credit cards.
How to Start
If you have never worked to build your credit, you must select your first credit card. It is wise to check your credit score for free before searching for your first credit card. Take advantage of reputable, well-reviewed apps and websites that allow you to monitor your credit for free without any hard inquiries.
What if you don’t have good credit? Don’t be discouraged; there are ways to build enough credit to help you get a credit card. Some companies like Western Shamrock provide personal loans to build credit, also known as credit starter loans. These are typically smaller loans, and your goal should be to make every single payment for such a loan on time.
It is also a good idea to learn more about credit and finance. Try borrowing a few books from your local public library; there have been numerous books written on how to build and improve your credit.
Myths About Credit Card Use
Let’s look at a few myths that many people have been led to believe about credit cards.
Myth No. 1: Credit card companies indiscriminately give out huge credit lines to people who cannot pay them back.
This is not true. Your credit card company will verify your income, credit score, and other factors and set your credit card limit accordingly.
Myth No. 2: I should put my credit cards in the freezer so I will not use them.
This is not necessary. As long as you repay your charges, it’s okay to swipe your credit card when shopping or making day-to-day purchases.
Myth No. 3: If I have the cash, I should buy it outright rather than charge it.
There can be many benefits when you charge purchases instead of paying cash for them. This can help you to earn rewards and points with your credit card company. It can also help you to improve your credit score once you have responsibly repaid the purchase amount.
How to Use Your Credit Cards
When using your credit cards, try to spend at least 10% of your credit limit. Avoid paying more than 40-50% of your credit limit at a time. You should also make sure that you do not allow charges to pile up. The benefits of a revolving line of credit – where you spend and then pay off purchases – are plentiful. It is a good idea to keep a couple of credit lines open. Make sure to always pay more than the minimum balance on all of them. You can still maintain a small balance on each of your credit cards. Pay attention to the due date of each credit card bill and plan your budget accordingly.
What Financial Goals Can Credit Card Usage Help You Achieve?
Once you learn how to manipulate your credit score wisely, you can achieve all kinds of financial goals, including property ownership. An excellent credit score can also help you secure rentals and get the best financing offers for vehicles. When you use credit cards responsibly to raise your credit score, you will gain access to better credit cards and loans with lower interest rates and more rewards.
Credit Card Rewards
The ability to get your dream home or your dream car can be a significant reward associated with responsible credit use. An increased credit score and a greater sense of financial responsibility are additional benefits that can be gained. Your credit card company will often offer unique bonuses and rewards to users who swipe and repay responsibly. Research bonuses associated with different cards and decide which appeal to you most. Many people like to utilize credit cards that allow them to earn airline miles with each purchase. If you charge regularly, this allows you to take fun trips regularly.