You should know credit cards aren’t scary, you just have to know how and when to use them. And you've come to the right place!
To avoid any mishaps with credit card usage, here are some credit card dos and don'ts so you’ll come out enjoying your card and reap the benefits they have to offer. I’ll also share some to-do’s if you've already misused your credit card and you're looking to repair your credit without obtaining more debt.
Before using a credit card, you should pick one that works for you and your needs. Shop around and do your research before choosing the credit card that’s right for you.
This means comparing interest rates and fees (think annual fees, foreign transaction fees, late payment fees, etc.) and loyalty rewards you might be able to take advantage of, like cash back or redeemable rewards points for travel or merchandise. Always know what you're getting into! You want to make sure you have a credit card that you can handle.
QUICK TIP:If you're searching for a credit card that fits your needs, you can start with Charlotte Metro's credit card options. You can explore our credit cards here
If you're a beginner with credit cards you should consider getting a secured credit card before getting a regular (unsecured) card.
Secured credit cards operate the same as regular credit cards but are backed by collateral. This means a security cash deposit is required to open a credit card account. There are higher approval odds with getting this type of credit card versus getting an unsecured credit card.
QUICK TIP: If you don’t know a thing about secured and unsecured credit cards, I highly suggest you look into them because knowing the difference can help you out in the long run. Here’s where you can start.
READ THE FINE PRINT
When doing your research for a credit card, make sure you read everything the credit card has to offer, including the fine print. Since there are so many lenders offering different types of credit cards, there will be fees and conditions that are different than others. Pay attention to credit card fees, grace period, rates if you defaulted on a payment. You don't want to miss any hidden conditions that could be sprung on you later.
Make sure to pay attention to:
Credit card fees
Billing cycle dates (not every card has the same due date!)
Rates if you defaulted on a payment
You don't want to miss any hidden conditions that could be sprung on you later.
Understand your credit card fees
Depending on the credit card you get, it may come with fees. Knowing those fees will help you stay prepared when paying off your credit card balance. Typical credit card fees include an annual fee, interest charges, late payment fee (if you're late on a payment), Balance transaction fee, etc.
Psst…You can check the credit card terms, such as interest rates and fees, before applying for the credit card. And don’t forget about that handy Schumer box! The Schumer Box will include:
Your Annual Percentage Rate (APR), which indicates the amount of interest you'll be charged on your purchase(s) if you don’t pay your credit card off in full each month.
The flat fee or annual fee
How your outstanding balance will be calculated
Number of days in a billing cycle
PAY YOUR CREDIT CARD BILL ON TIME
At the end of each billing cycle, you’ll be sent a statement by your lender. This includes your balance and the date your payment is due before it’s considered late. Make sure you pay the amount you owe on time otherwise you'll be hit with a late fee which could be around $35 and your credit score would be negatively affected, too.
Since your payment history affects 35% of your credit score, you could see a significant decrease in scoring if you're more than 30 days late making a payment.
Psst... Having automatic payments set up to pay off your balance is a sure way of avoiding missed payments. This is certainly not mandatory, but it will definitely help if you're afraid you'll miss a payment. Or, you can contact your lender to see if a direct deposit can be set up so a portion of your paycheck each month can go towards your credit card balance. Again, you don't have to do this, but it can help pay down debt from big purchase items.
READ YOUR CREDIT CARD STATEMENT EACH MONTH (& GET FAMILIAR WITH DUE DATES)
In relation to paying your credit card bill on time, you need to know how to read and understand a credit card statement.
Your statement will show a summary of how you've used your card for the specific billing period. It includes an overview of account activity, payment information (like your new balance for the month), payment due date, credit limit, available credit, and much more.
If you’re aiming to be a responsible credit card user, pay close attention to your statement, so you're always in the loop. Check for any problems. Fraud happens way more often than you think so if you don't recognize a charge, report it right away. Reporting fraudulent charges prevents you from paying for things you did not buy.
Psst... if you notice an issue with making an upcoming payment, you can always contact your lender. There may be a way they can maneuver your due date to a later time. Just don’t expect the date to be pushed out to 3 months. Lenders are normally generous to pushing due dates to a later date within the month.
KEEP YOUR CREDIT UTILIZATION LOW
A credit utilization ratio is your total credit to your total debt and is expressed as a percentage. Let’s say you have one credit card with a $11,000 credit limit, a credit utilization ratio of 30% means you currently have $3,300 balance.
On revolving credit, such as a credit card, make sure to keep your balance low. Why? Because it can indicate that you’ll have problems paying your bills on time. You should also try to keep your utilization under 30%.
QUICK TIP: If you have more than one credit card, the credit utilization ratio will reflect on the amount of debt you are carrying on all credit cards - just remember to keep your balance low. If you have a high balance on your credit card, make sure you pay off that balance.
A credit card is meant to help build your credit, so it makes sense to use your credit card. The trick is to only use it with purchases that you can actually afford or those larger items that you have a solid plan on how you’ll pay them off. That way, you’re less likely to get yourself in credit card debt trouble.
Seeing a large line of credit sitting in your account can cause some temptation to spend it. Make sure you purchase things that are a priority to you, and you have a way of paying them back. If you can't afford a purchase, then don't use your credit card to buy it. To help you make the best decisions when purchasing, stop and ask yourself - Is this a purchase I want or need?
Stick to a budget
To ensure you're not overspending or getting close to your credit limit, a budget will help you stay on track! Set a spending limit. If you budgeted your expenses to $500 pay off any credit card debt you have. Sticking to a budget means knowing how to budget, which you can learn about the Basics of Building a Budget and even snag a freebie!
THINK TWICE IF YOU PLAN TO USE YOUR CREDIT CARD AS A REPLACEMENT FOR CASH
This is for anyone who could be tempted to use a credit card on every. single. purchase. Your debt can add up making it harder to repay the lender.
Remember, with a credit card, you’re not just repaying the lender the exact amount you spent on a purchase you made, you’re paying more. This includes interest charges and other fees especially if there were cash advances, annual fees, and over-the-limit fees. Plus, if you’re late making a payment you can expect to pay a late fee.
QUICK TIP: Think twice if you’re deciding to use a cash advance (when you withdraw cash from the credit card account.) since you could get hit with pesky fees. Read more about cash advances here
TAKE ADVANTAGE OF CREDIT CARD PROMOS, REWARDS, AND DISCOUNTS
If you have a credit card offering rewards like racking up extra points for a discount in shopping or traveling - or better yet, cash back - take advantage! Credit cards with rewards offer an opportunity to put your hard-earned money back in your pocket.
AVOID USING YOUR CREDIT CARD IF THE POS TERMINAL LOOKS QUESTIONABLE
A POS, or “point of sale” is a machine that's installed at merchants like gas stations or cash registers. This allows merchants to accept payments when you use your credit card.
Well, guess what? This is how fraudsters can access your personal information. No, they don’t have to steal your physical credit card to obtain your personal info. Fraudsters conduct credit card skimming where hackers use the stolen data and sell your data, or create counterfeit cards, fraudulent charges - things like that, to credit card accounts if the POS Terminal looks questionable
Many have credit cards they never use so it might seem logical to close them. If you keep the credit card account open, you can benefit from having a longer average credit history and a larger amount of available credit.
The length of credit history and available credit both play a factor in your score. If you find an old credit card you haven’t used in a while, dust it off and use it for a week to keep it active. (You can buy something small like M&Ms – the transaction amount doesn’t matter).
First, if you go beyond your credit card limit, this will be against your credit card agreement and will result in additional fees and penalties and will result in the lender freezing or canceling your credit card account. Avoid this at all costs.
If you’re looking to increase your credit card credit limit, request it with your lender. You’ll more likely receive an offer to increase your credit card limit automatically when you’re demonstrated responsible credit card usage for a long time. Meaning you would have made on-time payments and paid off your credit card balance. (Like the things I talk about above.)
DON’T OPEN MULTIPLE CREDIT CARDS
Every time you apply for a credit card, the lender runs a hard inquiry which will decrease your credit score a bit. Although your score won’t be decreased forever, the inquiry stays on your report for about two years. If you apply for more than one credit card within a 6-month period, expect the score to decrease significantly. Plan for no more than 2-4 inquiries on any loan type per year.
DON’T LET OTHER PEOPLE USE YOUR CREDIT CARD
This one may seem like a given. Although it’s not illegal to let someone else use your credit card if you authorized it, you could wind up in a financial mess. Something can go wrong when others use your credit card on purchases you may not be able to afford, or they can lose your credit card. If anything happens to your credit card, you will be liable.
DON’T FEEL PRESSURED TO ALWAYS USE YOUR CREDIT CARD
Of course plan use your credit card for things you need but don’t whip out the card to use if you don’t have the cash or money in your checking account already. Before whipping out the card to make a purchase, ask yourself - do I need to use my credit card? Do I have cash? In most cases, it’s best to simply walk away before purchasing the item with your credit card so you can avoid digging yourself into debt.
A lot of times credit card users charge their credit card on things to rack up reward points but it’s important that you do the math. Make sure you buy things you can afford to make purchases on. This includes fees that come with making the purchase.
DON’T FORGET TO CHECK YOUR CREDIT REPORT
This is a must-do! It's helpful to know what lenders are seeing under the credit reporting agencies - Transunion, Experian, and Equifax. By law, consumers can check their credit reports for free once a year. If you haven't done so already, you can order your free reports here.
If there is any incorrect information that can negatively affect your scoring, contact the credit bureau and the organization that provided the wrong information to the bureau. Here’s more on how to fix errors on your credit reports.
here's what's next
Phew – that was a lot! But, it’s important to remember that knowing how to use a credit card and getting approved for one are two different things. Lenders like to see borrowers with good scores and a good-looking credit report. Here's more on what you should know before getting a credit card.
MY CURRENT CREDIT CARD IS HARD TO MANAGE - WHAT SHOULD I DO?
Credit cards are great but if misused, they can be a nightmare to deal with. Luckily, I've been there before and am happy to say I found the solution and I'm happy I'm able to talk about it. Here are tips that will help you.
As always If you have any questions or comments, our Customer Service Representatives are here for you. You can send an email, give us a call at 704.375.0183, or visit any of our branches.
As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.
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