8 Tips for Using Your Credit Card Well

While credit cards have been the downfall of many consumers, in reality the proper use of a card can make a big difference in your financial life. Knowing how to use a credit card to your advantage can help lead your credit score in the right direction. Here are some tips for using a credit card in a way that will benefit you:

Get One If you Don’t Have One
If you are new to the credit card process and have been relying on cash or checks until this point, it may be the right time to get a credit card. Remember to compare different cards from different companies before committing to a card. Sign up with a company that has a reputable background and the most suitable card benefits for your lifestyle.

Out With the Old Not Always Good
If you have a penchant for keeping things fresh and new, using this logic with credit cards can certainly do more harm than good. Applying for new credit as well as closing old credit accounts will cause your credit score to dip. Additionally, if you end up closing one of your oldest credit card accounts, you will affect your entire credit history, as the length of time you have an open account is a large factor in the formula for your credit score calculation.

Research Is Imperative
If you have credit cards that are outdated and not offering the incentives of the newer cards, definitely look into what different cards are available to match your current lifestyle. Shopping for the best card and not just jumping on any or every offer you receive, is the best way to build a new foundation of credit or strengthen one you already have. Use the many internet sources available to compare cards and be sure to contact the company directly if you should have any questions.

Too Much Credit Is Bad
While it can be flattering to find that with excellent credit, credit card company are happy to extend various amount of credit to you. However, applying for too much credit can hurt you financially. Stick with just a few cards for specific situations, like emergencies, gas purchases, and online purchases. By specifying what each card can be used for, you can help manage your finances more efficiently.

Don’t Overspend
The simple rule with credit cards is never charge more than you have in cash. You need to know beforehand that you can afford the purchases you are making and are capable of paying the balance in full at the end of the billing cycle. Otherwise, you risk getting in over your head and accruing a credit card bill which you can not pay, leading to interests charges and penalties.

Don’t Be Afraid to Negotiate
If you are a customer in good standing but were subjected to an increase in your interest rate in recent months through no fault of your own, you should try to renegotiate for a lowered rate. Contact your credit card company and ask to speak with a manager who has the authority to approve a lowered rate. Be sure to point out your excellent payment record and long-term loyalty as a customer. Don’t be afraid to mention taking your business elsewhere. If you truly have been an upstanding customer, the credit card company will be looking to do what it takes to keep you, especially in light of the increased defaults in recent months.

Rotate Cards
If you have multiple cards, capitalize on the incentives with each by rotating the cards for different uses and expenses. For instance, if you have a cash back credit card, it makes sense to put your bigger purchases on this card in order to reap the most rewards back. Of course, the decision will also depend on the rate of interest and your ability to pay your bill off in full each month. It also makes sense to keep credit cards active so that credit card companies do not close out the account for inactivity.

Live By Limits
The rule of thumb for using credit cards effectively is to never go over 35% of your credit limit on any of your cards. To creditors looking at your history, they will see that although you have access to much more credit, you use what you have responsibly. This is a favorable factor when financing a car, a home, or a personal loan.

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This entry was posted on Thursday, September 3rd, 2009 at 11:16 pm and is filed under Card Security, Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.