Credit cards are part of a lot of people’s lives. It is used to purchase medications, groceries, or even plane and concert tickets. Credit cards can help you earn rewards, which you can use for future purchases, or even for your future flights.
Having a credit card has its own perks, like, getting to pay your bills on time, or paying for something if you don’t have enough cash with you. However, some people tend to use their credit cards the wrong way, and this can cause them to grow in debt. If you are unaware of what these bad habits are, then the information below may surely enlighten you.
1. Having A Balance To Help Your Credit
Some people who own a credit card think that if they use their cards often, it will help their credit score in the end. But the truth is, it will never be helpful since carrying a balance means you will also have to use your hard-earned money to pay interest fees. Always put in mind that you gave a credit card to build credit under your name and not to carry a balance.
2. Annual Fee Is Worth It
Some people think that having an annual fee is worth it, especially if the card provides better and bigger perks. But there are credit cards that don’t have any annual fees. Typically, the annual fee may be worth it if you can use its perks often. For instance, if you have a credit card that lets you pay an annual fee and is letting you get free checked in baggage every time you travel, then that is definitely worth it.
It would always be best to choose a credit card that won’t ask you to pay for annual fees just because of a few perks, that you won’t probably use. These annual fee-free credit cards still have rewards and perks, so it would be better to go after them.
3. Maxing The Credit Card Out
Not a lot of people know that it is not a good idea to always max out or even use the credit card up to its limit. All these can ruin your credit score, even if you are paying on time. This affects the utilization ratio that a credit cardholder has. This is where the amount you spend on the credit that your given. All this means that the bank is checking if you are being responsible for your spending or not.
For instance, your credit limit is $4,000, and you can afford to pay that balance off. You should never charge your card $4,000 or even exceed that amount. The best thing that you can do is to spend at least 30% of your limit. This will give you a good credit standing.
4. Closing Credit Cards
Some people think that when they are no longer using their credit cards, they should immediately close it. But the truth is, whether you are closing them because you’re no longer using the cards or just because you don’t want it anymore, you are ruining your credit score. The reason is that it is bad for the utilization ratio, plus you are reducing the accounts’ age. Remember that your credit card is 15% of your total credit score.
So if you’re no longer using it, it would be best to just tuck the cards away. But make sure to use them once in a while so that they won’t be closed because of inactivity.
5. Not Collecting Your Rewards
If your credit card is earning rewards, it would be best to start using them. Besides you can save a lot of if you’re going to use your rewards. You can claim them for the available items in the catalog of your credit card company, or use it to purchase something that you’ve wanted for so long.
Some credit cards have reward systems that expire often. You can check this out so you can use the rewards before they expire.
These are all of the information that you need to know when it comes to using your credit cards. Use your credit cards wisely, and your credit score will surely be protected.
Based on Materials from Forbes
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