Tuesday, September 17, 2013
As most people know, good credit is essential in this day and age, which is a necessity to be able to take advantage of excellent rates for purchasing a car, and is a prerequisite when one is purchasing a home. What fewer people know is how to use credit cards safely and responsibly to save money and build up your credit score. With just a few tips, you can be well on your way to a lifetime of excellent credit scores and a great credit history.
The most important tip is to get into the habit of using your card(s) only for purchases that you truly need. The biggest mistake people can make is to use cards on everyday purchases, such as gas, food, and clothing. Some companies offer points or rebates on specific purchases, which can save you money if you use them responsibly, such as rebates on gas purchases. However, the more credit that you end up using on daily expenses, the less money you will have available for you in the event of an emergency. You also may find yourself starting to spend more per month than you can pay off, which forces you to start carrying a balance (paying less than the full due amount). When you pay off the entire balance, in essence you are getting an interest free loan from the financial institute. When you carry a balance on your account, however, the institution charges interest on the money they're loaning you, which can be substantial, especially if you have bad credit. Getting into the habit of paying off the card in full each month is the best way to quickly build your credit rating.
Read the Card Agreement
As a society, we generally have gotten into the habit of just signing up for things without reading the terms of what we have agreed to do. With credit, this is a bad habit, and you may find yourself in a bad situation without any sort of recourse. Take the time to read each credit agreement that you are sent, as well as any changes the companies may make. In the United States, companies are required to give you 45 days notice of any potential changes to the terms you initially agreed to. Once the 45 days are up, you are legally obligated to the new terms. If you find that you do not like or agree with the new terms, you should consider moving to a new card or institution that has terms more to your liking.
It is very important to check your statements at least monthly, if not more often (and this goes for all statements you have, not just your credit cards). Mistakes can happen, and if these mistakes are not caught quickly, you may find yourself having to pay for something that you did not receive or want. Generally speaking, if there is a recurring charge that goes unnoticed for 6 months, you will probably not be refunded the majority of the money, even if it was a mistake on the part of the credit card company.
If you are currently unable to pay the full amount, you would do well to pay more than the minimum due each month. Generally, this amount is between two to five percent of your balance due. If you pay just the minimum, though, you will end up paying more in interest than you really need to. Try to pay as much as you can above the minimum each month, and sooner than you might expect, you will find yourself back with a zero balance each month!
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