How To Properly Use A Credit Card

How To Properly Use A Credit Card

By: Barri Segal - Posted in:
Person learning how to properly use his credit card

It’s important to understand how to properly use a credit card. Although credit cards represent a convenient way to pay for the things you want, if you use them irresponsibly you’ll pay dearly for that convenience. The best way to use a credit card is to always try to avoid costly fees and interest. Use these five tips to keep your credit card utilization — and keep your credit in good standing.

1. Track Your Spending

It’s quite tempting to rack up more debt on your credit cards than you can actually afford to repay, so it is essential you maintain control of your spending. Consider using an app — such as Mint, Wally or Acorns — to track your spending. In addition, make sure you check your credit card statement on a regular basis.

2. Pay on Time, Every Time

When you receive your statement, check the payment due date — then, make sure you pay on time. Not only will this help build your credit, it will help you avoid late payment fees and extra interest charges. Consider setting up autopay for paying your credit card bills so there’s no chance of forgetting.

3. Maximize Your Payments

Making only the minimum payments required each month of your credit cards will result in it taking years for you to pay off your debt — and you’ll be paying an awful lot of interest. Try to make more than the minimum payment each month — if you can’t, consider transferring your balance to a card with a lower interest rate.

4. Don’t Use Credit Cards to Make Ends Meet

Taking out a cash advance from a credit card is not a good idea — even in the case of an emergency. Although it might serve as a temporary solution, you’ll end up in even more debt. Instead, build an emergency fund to use as a buffer for those rainy days so you don’t have to depend on credit.

5. Check Your Credit Card Statement

Keep all of your credit card receipts each month and reconcile them against the charges on your statement. You’ll be able to check that you were charged the correct amount for what you bought and you’ll be able to confirm you haven’t been charged for anything you didn’t. Look for duplicate charges, charges from businesses you don’t recognize and large or strange charges. If you find any conflicting information, get in touch with credit card issuer immediately and rectify it.

How to Pay Your Credit Card Bill

Person Paying Credit Card Bill Image

Your payment history — how and when you pay your bills — is a key component of your credit score. It’s crucial to make payments on time, because one missed payment might impact your credit score. Of course, life happens — and it can be challenging to keep up with your payment due dates. Use these three tips to stay on top of your credit card payments:

1. Set up Autopay

The easiest way to make sure you pay your credit card bills on time is to set up autopay. Set it and forget it — but make sure you have enough in your bank account to cover the bills or you’ll end up paying bank fees.

2. Request Text or Email Alerts

Many credit card companies offer cardholders the convenience of text or email alerts to let them know when their payment due dates are coming up. Sign up for either and receive reminders that will help you pay on time.

3. Request the Same Payment Date for All Your Accounts

If you have a lot of credit cards, it would likely be much easier for you to pay on time if all of your payments came due on the same date. You can call your card issuer or make a request online to change your payment due date — and never have to keep track of multiple credit card payment dates again.

When Are You Charged Interest on a Credit Card?

If you’ve asked, “How do credit cards work?” you’ll likely want to know about the interest you’ll pay. In a nutshell, a credit card issuer will charge interest any time you don’t pay off your balance from the previous billing cycle. Say you have a credit card balance of $500 — to avoid paying interest, you must pay the entire amount, or your next statement will include interest on the amount you didn’t pay.

Some credit card issues offer cardholders a grace period during which they can pay in full and avoid interest — make sure you check with your issuer and see if it does. The only time you won’t pay interest on your credit cards is if you begin a new billing cycle with a zero balance — or if you happen to have a card with a promotional 0% APR.

How to Avoid Credit Card Interest

Credit card issuers charge interest in exchange for providing cardholders with the convenience of paying off their balances over a period of time. If you rack up those interest charges, however, you’ll be paying back far more than you “borrowed.” As you now know, if you pay off your balance in full each month, that’s how to avoid credit card interest.

If, like many people, you can’t afford to pay off a card’s large balance at once, try your best to pay it down as quickly as possible. And while you’re paying off your balance, refrain from using that card. If you pay it off as soon as possible you won’t completely avoid interest charges, but you’ll significantly cut down on the amount you’ll pay.

Another way to avoid paying credit card interest is charging only what you can afford to pay off each month. If you can afford only to pay $200 a month on a credit card, don’t charge $1,000 on it. Create a budget so you’ll know exactly how much you can afford to pay to credit cards each month — then stick to your maximum purchase limit.

The Bottom Line

Credit cards are a convenient way to pay for things over time, but that convenience comes at a cost — interest. There are different ways to avoid paying for interest, from paying off your balance in full each month to choosing a card with an introductory 0% APR. Anyway you look at it, once you learn how to properly use a credit card you’ll find that avoiding paying for interest will increase your monthly amount of discretionary income — and that’s always a good thing.

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