What You Need to Know About Smart Credit Card Use

Are you applying for a credit card for the first time? Having a credit card will open many doors for you, especially if you’re trying to prepare to make big purchases, like buying a car or taking out a mortgage. Here are a few things you should know about smart credit card usage to prepare you for the future.

Always Pay it Off

First, make sure that you always pay off your credit card. This is one of the most essential steps of having a credit card. Even though having a credit card might feel like you have free money to spend, paying more money on your credit card than you have in savings can be a dangerous habit. If you don’t pay off your credit card, you can be penalized. 

Your credit score will drop, showing lenders that you aren’t very good at keeping up with payments. Also, your credit card might get revoked and it might be more difficult to get another credit card in the future. As a good rule of thumb, try to use your credit card like a debit card. Try to only purchase things that you have the money to pay for each month as your payments are due.

How to Increase Your Score

Next, to use your credit card in a smart way, you’ll need to know how to increase your credit score. Your credit score reflects how good you are at keeping up with payments and managing your finances. If you have a great credit score, you can qualify for better credit cards with more extensive rewards and benefits. 

You’ll also have better luck getting a car or house loan or making other big payments. One of the most essential parts of increasing your credit score is always making your payments on time. Payment history, which includes missed payments, makes up 35% of your score.

Don’t Max Out Your Credit

Finally, if you want to be a smart credit card user, make sure that you don’t max out on your credit card. You have an allotted amount of credit that you can spend at one time, and you should try to avoid spending up to that credit limit. Generally, you should try to avoid using more than 30% of your available credit before you pay it off. If you max out your credit, your credit score could get lowered. Your credit score is also determined by how you utilize the credit that is available to you, and if you’re often maxing out on your card, that will show that you can’t utilize your credit very well. This could hurt your credit score. 

So, if you’re applying for your first credit card ever, remember these tips for smart credit card usage. Make sure that you always pay off your credit card, know how to increase your score, and don’t max out on your credit. This will help you to have (and demonstrate) greater financial stability and management with regard to your credit card.

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