3 Tips For Using A Credit Card
Having a credit card is an excellent idea. However, when you make the decision to get a credit card, it is very important that you use it as responsibly as possible. Credit cards are excellent at building your credit when used correctly, but they can also destroy your credit if you don't use them as you should. Here are three important tips for using a credit card.
Use A Single Card For Certain Purchases
A great way to get the benefits of using a credit card, without worry about overspending on it, is to set it aside for certain purchases. For example, you can use one credit card strictly for gas purchases or for groceries. This means that this is the only time that you use this card. This makes it easy for you to know how much you are spending on it each month, which makes it easier for you to pay off. Since using a credit card and paying it off on time is the key to building good credit, it is crucial that you use it correctly.
Keep The Utilization Rate Low
While you are given a certain amount that you can spend on your credit card, it is very important that you don't max out your card. Instead, you want to keep the utilization rate as low as possible. A good credit utilization rate is generally under 30% if possible. By doing this, you allow yourself to build and/or maintain credit, which is essential if you are looking into making future purchases, such as a home or vehicle.
Pay It Off Entirely Each Month
If your credit card has a balance on it for over a month, then this balance begins to gain interest. Since credit card interest is generally fairly high, it is important that you avoid this if at all possible. A great way to make sure that you never pay a penny of interest on your credit card is to pay it off each month. This allows you to get full use of your card throughout the month, but makes sure that you never have any lingering amount left over.
There are several ways to use a credit card properly. You can use it exclusively for certain kinds of purchases, keep the utilization rate of the card as low as possible, and pay off the balance of the credit card every single month.