Almost every adult has at least one credit card today as it has become a basic need for all of us. But, only a few people know how to use your credit card in the right manner. You might be a responsible user or might be doing a lot of mistakes unknowingly. In order to get the most out of your credit card, it is very important to use your card responsibly and in the right way. You might be aware of a few things that you need to keep in mind while using your credit card, but that is not enough. If you are a credit card user, you must know what should you do and what you shouldn’t do with your credit card. We are here with a list of 10 do’s and don’ts of credit cards that will help you build a strong credit:
Always Make Payments on Time
Paying your credit card bills on time is the most important thing to do in order to maintain a good credit history and avoid debt consolidation. Your payment history is the biggest factor that is considered by the Credit bureaus while calculating your credit score as it makes 35% of your score. Moreover, your payment behavior reflects how responsible or risky you can be as a borrower. Having a bad payments history with a number of missed/late payments will not only take your credit score down but will also keep you away from a lot of better offers and deals. So, you must try to make your credit card bill payment on or before the due date always.
Check Your Credit Card Statements Regularly
Many of you might be ignoring the Credit card statements that you receive every month via emails, but you are not supposed to do that. It is really important to go through your credit card statement every month and check all the transactions thoroughly. By doing so, you can track your spendings and avoid making unnecessary spends from the next time. Not only this, but it will also help you ensure that no fraudulent transactions are being made on your card. Someone might be using your credit card without your information and you will never know about it if you don’t check your statements. Moreover, sometimes some transactions are mentioned two times on your statement, and sometimes there might be calculation errors (however, there are very few chances of this), and you can get them fixed only if you check your statements and not otherwise.
Try Paying Full Outstanding Amount Every Month
Instead of paying only the minimum amount due, you should try to pay your credit card bill in full every month. When you pay the full amount each month, you get an interest-free period of up to 50 days, but you don’t get any interest-free period when you only pay the minimum amount due. However, you can avoid the late payment fee by paying the minimum amount, but you should pay the full amount so that you can avoid the interest charges too.
Use Your Rewards Credit Cards Wisely
If you are having a credit card that offers reward points on your purchases, you must know how you can get the maximum benefit out of it. The first thing to do is to choose your rewards credit card wisely as different credit cards provide maximum rewards on different categories. So, you must go with the one that is most beneficial in a category where you love to spend the most. Moreover, you should redeem the reward points wisely by checking for all the options available for redemption and the value of reward points as well. Redeem your earned points against a category, which is useful for you and which offers the maximum value of reward points.
Be Aware of Credit Card Fraud
Though credit card issuers try their best to ensure the security of your credit card, credit card fraud still seems to be increasing every day. You should be aware of how fraudsters can steal your credit card information and follow all the security measures. Make sure to keep your credit card always with you or at a safe place. Never share your personal financial information with anyone outside your family or not even them.
Never Delay a Payment By More Than 30 Days
It is true that late/missed payments affect your credit score badly so you should pay your bills always before the due date. But, you also need to be aware of the fact that credit card payments that are late by less than 30 days are not considered as late payments and reflect as timely payments on your credit report. So, even if you miss your payment sometimes, you must make sure to pay it before 30 days from the payment due date. However, late payment charges will be applicable in this case but you can avoid impacting your credit score. Delaying a credit card payment by more than 30 days can have a very bad effect on your credit score.
Don’t Withdraw Cash If Not Necessary
It is never a good idea to withdraw cash using your credit card as it invites a lot of extra charges on your account. when you withdraw cash using your credit card, a cash advance fee is charged which is generally 2.5% of the transacted amount subject to a minimum amount, which can vary for different card issuers. Moreover, no interest-free period is applicable on cash advances and sometimes the interest is higher than other transactions. So, you should avoid withdrawing cash with your credit card as long as it’s not a real emergency.
Don’t Use More Than 30% Of Your Credit Limit
You are not supposed to spend the whole credit limit on your credit card every month. You should try to utilize only 30% or less of your total credit limit in order to maintain a good credit score. If you use your full credit card, your card issuer may consider you a risky borrower and hence decrease your credit limit. Moreover, it will also affect your credit score as your credit utilization ratio makes 30% of your credit score. So, if you have a card with a lower credit limit, you should either try to get a higher credit limit on the same card or get another card with a higher limit.
Don’t Close An Old Credit Account If Not Necessary
The average age of your accounts or the length of your credit history is also among the major factors that are considered while determining your credit score. To have a good credit score, you should try not to close your old credit accounts so that the length of your credit history doesn’t get shorter. But, if you feel that closing your account is necessary as you are being charged on it but it is not at all in use, then you must go for it. As long as the card is affordable, there is no harm in keeping it even if you don’t use it.
Don’t Apply For Credit Cards Very Often
When you apply for a new credit card, the card issuer checks for your credit report and it is referred to as hard inquiry on your profile. Too many hard inquiries within a short time period can have a negative effect on your credit score. It is because when you apply for too many cards, the card issuer/moneylender might think that you are very much in need of money and there are chances that you will default payments. So, if your card application is rejected, try not to apply for another card within the next 3-6 months.
Understanding the do’s and don’ts of using a credit card is really important to use your card wisely and get the most out of it. The most important thing above all is to be a responsible user by following all the points given above as that is only how you can enjoy using a credit card. If you don’t use your credit card in the right manner, it can become your worst enemy, but using it in the right way can help you save a lot on everything you do using it. So, make sure to make your payments on time, don’t use your full credit limit, and keep all other things in mind in order to make your credit journey smooth and successful.