Whether you’ve had a credit card for years or just opened one you need to use it responsibly. So many people get caught up in how easy it is to use a credit card they forget the basics. Credit cards have many benefits but without remembering this advice you might put your finances in jeopardy. Here are the best tips when using a credit card.
Only spend what you can afford
I know this seems obvious, but it can be tempting to have a seemingly limitless card to swipe. You have to keep in mind that you will be paying for whatever you buy at a later date. If you don’t have enough cash to cover purchases in your bank account, then you shouldn’t be making those purchases. Reckless spending can get you stuck in credit card debt which leads us to the next credit card tip.
Don’t just pay the minimum payment
Every month your credit card company will give you the opportunity to pay a minimum payment instead of paying everything you owe. Avoid this if you can and think back to tip number one. You should never put yourself in a situation where you are buying things you can’t afford.
While you may feel more comfortable paying the smaller amount required, you’re really just leaving yourself debt for later. Also, the remaining balance on your credit card that you don’t pay will begin to accrue interest. But this debt isn’t just like most car loans, mortgages, or personal loans with decent rates. Credit card interest rates usually range from 15-25% on average!
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Let’s say you spend $5,000 but instead of paying it off you just pay the minimum payment. Maybe that keeps you feeling better short term but long term it’s going to come back to haunt you. That $5,000 balance will accrue interest every month you don’t pay it off and continue to grow.
In one month, it will increase by about $100. In three months by over $300. By the one-year mark, the balance will have increased by $1400! That’s the power of compound interest working against you rather than in your favor. This is very important tip to remember when using a credit card.
Pay off your balance every month
This goes hand in hand with the previous tip when using a credit card. To avoid all of the talk about interest rates and debt accruing over time, pay off your credit card balance at the end of each month. You’ll never have to worry about getting behind on your credit card debt like 30% of people in the United States.
Take advantage of perks when using a credit card
Although overspending or spending money you don’t have gets you in trouble, you still need to use your credit card. Credit card companies offer a variety of perks and benefits for spending on purchases through them. Some are just introductory benefits while some you can take advantage of as long as your account remains open.
The introductory benefits usually involve spending a certain amount of money over the first few months of the account being open in order to receive a cash bonus. Luckily the amounts needed are typically very achievable for the average person and won’t stretch your budget. If you usually spend the amount, then why not use your new credit card and take the free bonus money!
Along with introductory perks, credit cards will offer at least 1% cash back on every purchase and then additional perks from there on. Maybe it’s not a large sum of money but 1% back on all your purchases still counts for something. Imagine if you spend about $3,000 a month via credit card. You’ll get $360 in free money. Yes, it’s actually free! There’s no catch.
Put our credit card tips to use!
As long as you are responsibly following our tips when using a credit card, you will just make free money from credit card companies. They only profit from you when you don’t pay off your credit card debt so ensure you do so. Make sure to be disciplined and follow our credit card tips. Good luck and happy swiping!
