Credit cards are a double edge sword. They can help make your life a financial heaven and hell depending upon how you use them. Following are some tips on using your credit cards wisely. The benefits of using your credit card wisely include but not limited to cash back, bonus points, airline miles and at best a great credit score. On the other hand if you decide to use them in an unwise fashion, you might end up in a mountain of debt.
Rule No. 1 is to pay off all you balance every month. You will have to pay interest on your spending if you don’t do that and that interest rate is very tricky. It takes a lot of discipline to pay back balances on time. According to a recent report by Federal Reserve, Almost 40% of all house holds in America carry a substantial amount of credit card debt.
Protect Your Credit Score
Make all your payments before the date they are due. Late fees can pile up quickly as they are around $20 – $50. If you miss more than two payments that will automatically increase your interest rate to “Default Rate†(around 24% to 30%) . Late and missed payments also lower your overall credit ratings. That can trigger interest rates on other loans to go up as well as getting soft loans in future impossible.
Only Keep the Cards You Need
Most of industry experts recommend that you should carry at least 2 and at most 6 credit cards. Stay in this range. If you apply for lots of cards that will damage your credit score. Similarly, closing many cards at the same time will also hurt your credit score. So better safe than sorry.
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