How Do I Effectively Use My Credit Card?

Many people believe credit cards to be destructive in every scenario. However, proper card management can make your life easier and even allow you to save money in the long term. Money management is still money management; mindless spending will still cause problems.

If You Don’t Have the Money, Don’t Spend It

Credit cards are incredibly convenient. You are safer with a card in your pocket than with cash. However, you will have to be vigilant to avoid overspending. When your credit card statement comes in,

• review it for accuracy
• pay at least the minimum immediately
• as possible, pay off balances

If you need to use your credit cards as an emergency fund, go back to your statement each month and note what expenses were wise or worth it, such as groceries or enjoyable travel. Make sure you also mark expenses that were not worth it, such as disappointing meals out. Being honest about your spending can make it easier to get a handle on it.

You Can Build a Good Credit Rating by Managing Your Cards

Maxed credit cards are hard on your credit rating. In fact, even charging up to 50% of your available credit can have a negative impact on your credit rating. A poor credit rating can

• lead to higher interest rates
• raise your insurance premiums
• impact your ability to get a better job

Your utilization rate, or debt in relation to your total available credit, needs to stay low. According to the experts at SoFi, your credit card utilization should stay at 30% or lower. If you have a $10,000 limit, keep the balance under $3,000 and, of course, do your best to pay off the total balance each moment.

Going for the Points

The right credit card, properly managed, can save you money. If you have a logical budget and are tracking your expenses, you can

• earn travel miles for a trip you were already planning to take
• earn points to a retailer you already use
• earn loyalty points for groceries or gas

If you have the money for your rent in the bank and can log in and pay via the portal, the points you earn could actually lower your food expenses. Check to make sure that using your card won’t lead to more fees.

Choose the Right New Card

One of the benefits of paying your balance in full is that you will soon get more offers for credit cards. Look for

• Extended 0% APR terms for big purchases
• Welcome bonuses for money spent in the first few months
• Cashback offers

If you need a new washer and dryer, a card with a $200 welcome bonus can lower the cost of that necessary purchase; a 0% APR card will give you more time to pay off the purchase if you need it. If you have a trip planned and money in the budget, a card that offers money back on travel will lower your ticket price.