From maxing out to debt-free: How to manage your credit cards properly

Credit cards can be a helpful tool when used responsibly. Making scheduled, on-time payments can boost your credit score, and certain cards offer rewards for specific products or services or even offer a 0% purchase rate on your transferred balances from other credit cards.

If your credit card spending becomes out of control, your credit card could increase your monthly payments and accrued interest. Follow these credit card tips to help avoid common problems.

Pay off your balance every month

Steer clear of paying interest on your credit card purchases by paying the whole balance on every billing cycle. Resist the temptation to spend more than you can afford to pay in any given month, and you’ll enjoy the benefits of a credit card without interest charges.

Use the card for needs, not wants

Credit cards should be handled lightly. Theft and squandered purchases can lead to debt. Credit cards are handy for emergencies, such as a phone bill that must be paid before payday. Use the credit card only as a temporary loan to yourself, and then pay back the amount in full to avoid interest charges as soon as possible.

Never skip a payment

Even if you make the minimum monthly payment, that bill should be paid. Missing a payment can result in a late fee, penalty interest rates, and negatively impact your credit score.

How to use a credit card as a powerful budgeting tool

Reassured that you can handle your credit card responsibility responsibly and pay off the balance every month, try using it as a regular budgeting tool. By always making all your purchases using your credit card, you can see exactly how much you have spent at the end of the month. Of course, only use this strategy if you are sure you can pay off the balance every month. To ensure that your credit card payments do not overstretch your budget, prioritize your budget when spending.

Use a rewards card and save money!

If you use a credit card for most or all of your purchases, a credit card with rewards is an excellent option. You might not pay interest and can earn rewards such as cash, airline miles, or other points.

Keep your credit utilization low to maintain a good credit score

Keeping your credit utilization ratio under 30 is one way to keep your credit rating healthy. This credit utilization ratio represents the percentage of your credit available to you. For example, if your credit limit is $1,000, you want to keep your balance under $300. Remember that it applies to the sum of all your credit cards, so having one with a $3,000 limit and a $3,000 balance still applies toward the ratio.