8 Helpful Tips for Properly Managing Your Credit Cards

8 Helpful Tips for Properly Managing Your Credit Cards_48554325_s

Whether you’re a credit card newbie or have a lot of experience with those magical little pieces of plastic, everyone can benefit from learning some tips on how to properly use and manage their credit cards. After all, credit cards are one of the most widely used (and abused) financial tools in our culture.

The problem isn’t that Americans are not responsible for their finances. The truth of the matter is that many of us simply haven’t been educated properly on how credit works. So, we’ve compiled eight tips for helping you understand your credit cards and leverage their power instead of falling victim to their risks.

Be Strategic – Having high lines of available credit can certainly help your credit score, but if you open too many credit cards during a short period of time, it can send some red flags. Each time you apply for a credit card, a hard inquiry note gets attached to your credit report. Too many of these inquiries in one period can make it appear that you are living above your means. This is especially true if you are carrying a revolving balance on them.

Avoid Credit Card Overwhelm – Maintaining a vast number of credit cards can take a lot of work. With each credit card, it’s important to track balances and payment dates, so if you have too many, you may lose track. Don’t fall victim to overspending and forgotten payments, simply because you’re overwhelmed by the number of cards you have opened.

Pay More Than the Minimum – Credit card statements come with a minimum payment each month that is dependent on the balance. Paying the minimum balance does nothing to the principle balance on the card; it only pays into the interest the lender is charging you. Paying off your credit card each month lowers your credit utilization rate (the amount of debt you carry versus your total limits) and boosts your credit score.

Battle the High-Interest Rates First – When paying off your credit cards each month, be sure to pay your high-interest rate cards first. If you are still using your credit cards and aren’t simply digging out of past debt, you may need to reconsider your spending habits if you aren’t able to pay off your entire credit card balance each month. Regardless, make sure you aren’t losing money by paying the minimum balance on your high-interest cards while paying off the low-interest ones.

Avoid the Discount Temptation – We’ve all been tempted by the immediate gratification of applying for a retail credit card in order to save 10% or 20% on your current purchase. Avoid the temptation (or at least look at the fine print) because these credit cards most often have incredibly high interest rates that are nothing but trouble.

Don’t Get Behind – Simply put, past due balances can destroy your credit score. Payment history is the single largest factor used when calculating your credit score. If you can’t afford your payment, contact your lender to see if they can grant you a grace period. Ignoring the bill will only hurt you, as red marks remain on your credit report for up to seven years!

Monitor Your Credit Score – Don’t wait until you need your good credit to check your credit score. Regular monitoring of your credit report not only let’s you protect against identity theft, but also lets you correct false reports.

Keep Old Accounts Active – An important element of your credit report is your credit history. If you have been in good standing with your credit card for some time, consider keeping it active. Length of your credit history makes up about 15% of your credit score, according to FICO.

At Camino Federal Credit Union, we want all of our members to understand their credit and financially thrive. Need more financial tips to help you along the way? Connect with us on Facebook!