You've Got Credit Cards - Here's How to Handle Them Well

Credit cards are powerful, that much is certain. They can be very helpful for making large purchases, but they can also prove dangerous if used without thoughtfulness.

Here are some best practices you can use to make your credit cards work for you instead of the other way around.

1.  Pay on Time

This one may be obvious, but paying your bill on time (and in full) is very important for making your credit cards work for you. Paying on time helps you avoid late fees, high interest rates and negative effects on your credit score.

2. Never Use Up Your Credit Limit

Although you may have up to a $10,000 credit limit, that doesn’t mean that you should use all of that money each month. In fact, a good rule of thumb is to use only around 20% of your credit limit. So, if you have a $10,000 limit, you should keep credit expenses to roughly $2,000 each month.

This is important for a few reasons. Firstly, lower balances help increase your credit score over time. Secondly, lower balances encourage you to pay off your bill in full each month. Lastly, consistently keeping a low balance means that you will have more wiggle room in the case of an emergency expense.

3. Research Reward Options

Credit cards often offer their customers rewards in the form of cashback, points, etc. Take a look at the way you use your credit card on a monthly basis. Do you spend most of your limit on groceries or gas? What about travel?

Then, start researching the best credit card for you. Hotel or airline cards may be best if you prefer to use your rewards toward a trip. Likewise, some credit cards will reward customers more if they use their card for specific purchases like groceries or gas.

Whichever rewards you choose, be sure to research and carefully read all of the rules involved. Sometimes they can be difficult to understand fully.

4. Keep Credit Cards Open

The length of time that you’ve had your credit card open and active directly affects the health of your credit score. The longer you’ve been using your credit card wisely, the better your score, so don’t rush to cancel cards that you can carry on using.

Check out September’s Money School After Hours for more information on taking control of your credit score. Registration is free!