Credit Card Management Tips: Suggestions that Work
Depending on how you use them, your credit cards can either turn into a constant source of financial worry, or they can help you manage your expenses and unexpected emergencies rather smoothly. Not that everything depends upon the user alone, because some of the steps needed to avoid common credit card fees, charges, and overuse scenarios must be taken even before you apply for a new credit card. Let’s start with that first.
Don’t Apply for a Credit Card without Checking Out All the Fees
Banks and credit unions do not provide credit cards to their customers without financial interest, and you can take that statement quite literally! Always find out everything that you can about a credit card, before applying for, or accepting one. For example, an exceptionally low rate of interest may make a credit card seem more lucrative than others, but it might not feel like a good deal anymore if you check how much they are charging you annually just to let you use that card. Beware of credit cards with suspiciously low interest rates because most of them make up for it through some fee or the other.
Check this post by Tally that points out the nine common credit card fees and how to avoid them. If you have already accumulated a significant credit card debt though, then it might be a bit too late to choose cars. In that case, explore the site a bit further. Tally may extend a line of credit to you at a significantly lower rate of interest. They will pay off all your credit card debts (if approved) and reduce your monthly repayments down to a more manageable amount.
Don’t Maintain Any More Credit Cards than You Must
Maintaining too many credit cards is a bad idea for multiple reasons. For starters, did you know that just the fact that you have access to multiple credit cards alone is sufficient to lower your credit score? Yes, even if you have never spent a single dollar from any of your credit cards or if you have never missed a single payment, having access to too many credit cards alone will have negative impact on your credit score.
Credit cards are unsecured loans, so if you have multiple unsecured loans, the credit bureau sees it as a red flag. Eventually, you can boost your credit score back up again by making timely payments, but if you cancel some of your credit cards, it will have a more positive impact on your credit score. In fact, you will likely see it on your credit history as a green flag. How many credit cards is too many though? That is a question only you can answer but having more than three cards is not a financially sound idea for most individuals, as it considerably increases their chances of landing in credit card debt.
Don’t Spend More than 30% of Your Allotted Maximum Limit
If you spend more than 30% of your credit card’s allotted maximum limit, it will lower your credit score quite a bit. One may argue about the validity of having $10,000 as credit limit when you cannot spend more than $3,000 without worrying about it, but there is no way to go around the rules. Credit card companies are themselves quite infamous for charging higher than usual fees to customers who spend more than 70% of their maximum credit limit.
To top things off, some credit card providers will report your usage to the credit bureaus even before they have billed you for the expenditure. It means that even if you spend $9,000 from your credit card’s maximum allotted limit of $10,000 and pay back $7,000 before the next billing cycle, you might still not be able to avoid the credit bureau’s red flag. That’s because your credit card company may have already reported the expense even before generating the bill.
It does not always happen of course, and if you bring down your balance below 30% before the next billing cycle, it’s quite likely that your credit report will also reflect that with a green flag in next month’s report. You should make frequent payments, especially if your credit limit is not as high as you like it to be. Low credit limits make it difficult to stay below that 30% mark, so frequent payments are recommended to keep your credit score as unaffected as possible.
Do Not Miss Due Payments
If we could always pay off our entire credit card bills at once and well before time, then credit card debt would never be an issue. Unfortunately, that is not always an option. A long list of things can happen to keep us from making those payments in time, even if we want to. That being said, everyone should always try to pay the minimum due amount on their credit card bills every month.
Try to pay more than just the minimum outstanding per card, but don’t ever ignore the need to pay off the minimum amount. This should keep your credit history relatively clean since making at least the minimum payment every month does count as making timely payments. In case you have used more than 30% of your credit limit, and the balance stays above 30% even after making payments, your credit score will go down. Nevertheless, it will still not be marked as a missed payment, which is considered a much more serious issue by both credit card providers and credit bureaus.
Try to Separate Credit Card Due Dates by a Few Days
Anyone who relies on their credit cards to make regular payments can benefit by getting cards with separate due dates. If you plan to maintain two credit cards, make sure that their due dates have at least 7-10 days between them. For example, if card 1 has a bill cycle with the 18th as its current due date, card 2 can have its due date set on the 10th of every month.
This gap provides extra time between the two credit card payments, which can be handy. For workers who live on weekly paychecks, this little strategy should prove to be quite effective for avoiding missed payments and the consequent, hefty late fees.