6 Healthy Habits for Managing Credit Cards
Credit card bills might seem scary but using credit cards is an important tool for building your credit score. Studies show that using credit cards as compared to cash does lead to overspending but credit cards offer more consumer protections than cash or debit cards. Plus, they offer rewards, such as points for free travel or cashback bonuses.
Whether you are dealing with a debt or find yourself constantly overspending, there are some habits you can start today to help you get control of your finances. To get to the right place with your credit cards, adopt these six habits of highly effective cardholders.
1. Have credit card debt? Deal with that first!
Paying off credit card debt can seem impossible but with little planning and dedication, you can be debt-free in no time.
Start by making a summary of all the credit card balances and start paying off the ones with higher interest rates first. It is important to make a payment plan and stick to it. Get into the habit of setting aside a certain amount every month to go towards your credit card debt and set up automatic payments so you don’t even have to worry about it.
There are several credit cards companies that offer balance transfer at a lower interest rate. If you are able to find such offers, it is worth it to transfer the higher interest credit card balances to the lower one as you pay them off.
2. Pay your credit card balance in full each month and on time.
Missing credit card payments not only cost you interest and late fees but it also affects your credit score. Poor credit scores will end up costing you even more with higher rates on a mortgage or car loan or your ability to qualify for those. If you are unable to pay off the full balance, try to make at least the min payment to avoid any negative impact on your credit score.
3. Do your homework and utilize credit card rewards to your advantage
There are quite a few credit cards out there that offer different rewards. Narrow down what kind of rewards you are looking for and pick a credit card accordingly. For example, some credit cards offer travel rewards while some offer cashback on regular purchases like groceries, etc.
Using two or three credit cards can certainly deliver more value than using just one. But splitting purchases among a dozen cards brings diminishing returns and creates an organizational nightmare.
If your wallet is overcrowded, identify the few cards that bring you the most value, and concentrate your spending on those accounts.
4. Stay below your credit limit each month.
Did you know that maxing out your credit cards each month even if you pay off the balance, affects your credit score? To keep your credit scores in shape, use less than 30% of the limit on every card. The lower your balances, the more your scores will benefit.
5. Monitor and track your spending
Your credit card bill should never be a surprise. To keep track of your spending, take advantage of the tools your credit card issuer offers. Sign up for text and email alerts through the credit card website to monitor your spending.
When your credit card statement comes, don’t just pay it — read it. Otherwise, you could miss billing errors, fraudulent charges, or other problems.
Also, remember to stick to a budget. Budgeting doesn’t require Heroic effort when it’s part of your routine. Pair your weekly budget check-in with another weekly activity such as grocery shopping. As you do these tasks side by side repeatedly, budgeting becomes a habit.
6. Already missed payments? Learn to bounce back from mistakes!
Making a credit card mistake — missing a payment or spending too much — might make you feel like curling up under the nearest rock. But it can also be an opportunity to grow.
Direct your energy toward solving your problem rather than wallowing in it. Ask yourself, “What can I do to fix this?” Then get to work.
Credit cards can open up plenty of doors for those interested in improving their financial health. Whether you’re learning how to use a credit card for the first time or looking to get more out of an existing card, embrace healthy credit card habits — they’ll only serve you well.