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How and when to use your credit card

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Pay off your credit card balance on time
Paying on time is critical to building a good credit history, and missing payments can damage your credit score for years. Make sure you know your due date so you don’t add a late fee to your balance. You may also want to consider setting your minimum payment to be automatically transferred. While making the minimum payment each month may not help you reduce your debt, it will at least ensure that your payment history is consistent.

Pay as much of your credit card balance as possible each month
The best budget goal is to pay off your entire credit card balance each month, especially when you open your first credit card account. This way, you can avoid paying interest on your credit card.

If you are unable to pay off your balance in full, make every effort to pay more than the monthly minimum payment. This will help reduce the amount of interest you incur on your balance each month.

Use your credit card statements as a monthly financial health check
Reviewing your statements regularly will give you a better understanding of your monthly expenses, while also preventing fraud or errors that could damage your credit.

When you receive your statement, check it to make sure you’ve confirmed all charges and evaluate how you’re using your credit limit when you review it. If you are having trouble meeting the minimum payment each month, you may want to consider limiting your credit card usage the following month to help you get back on track. However, if you can easily pay your balance in full, then you can apply for a credit limit increase, which may improve your credit score.

Building your credit score
Here are some tips for building your credit score.

Pay your bills on time: Successful payments are recorded on your credit report and account for 35% of your credit score.
Pay close attention to your credit utilization ratio: Credit utilization ratio is one of the biggest factors affecting your credit score and is calculated by dividing the current credit and loan balances you owe by your total credit limit. The optimal credit utilization rate is less than 30%. For example, if you have a credit card with a $1,000 limit and you currently owe $250, your credit utilization rate is 250/1000 (25%). Two ways to keep your credit utilization rate low are to keep your credit card balance low and to extend your credit limit. You can use both strategies when you are confident that you can manage your credit spending and payments carefully.
Keep your credit cards open: Even if you pay off your credit card balance in full, keeping your credit cards open will extend the life of your credit cards and your credit history. In turn, your credit age accounts for 10% of your credit score. But check the terms of your card and continue to monitor your monthly statements to make sure there are no penalties for keeping a zero balance on your card.
Create a budget
Some financial advisors will tell you to avoid using your credit card for things you need, such as rent, groceries or utilities, while others will encourage you to add these items to your balance so you can cash out through your credit card’s rewards program.

Whichever path you take, the key to healthy credit card behavior is to accurately assess how much you can afford to spend on credit cards each month and not to exceed that amount. The best way to make that assessment is to track your spending through a budget.

There are many money management tools that automate budgeting, including Chase Budget Builder. search money management tools to find the one that meets your needs and use them to create a consistent spending approach.

Take advantage of rewards programs
Credit cards with rewards programs allow you to earn cash back or redeem rewards points for discounts or gift cards. Some programs include rewards for specific types of spending (such as groceries or gas stations), you can redeem points for discounts at travel and retail stores, and more.

If you feel you can easily meet your monthly credit card payments and can charge more to your credit card, take advantage of a rewards program by shifting some of your regular monthly expenses to your credit card. If you do this, try to make your monthly credit card payments at least the amount of these monthly expenses so you don’t get caught up in a false sense of financial security and start to outlive your income.

When to use your credit card to finance a big purchase
Before you walk into a store to make a big purchase, make sure you know your credit card’s credit limit and its APR (annual percentage rate). Knowing these things can help you determine if using your card is the best financing option for you.

When to transfer credit card balances
If you’re having trouble meeting your credit card’s minimum payments because of additional interest and fees, it may be helpful to transfer your balance to a card that offers a 0% APR during the introductory period. Having this interest-free period may be a great incentive to make a plan to pay off your debt within a set period of time.

You can do this by budgeting to make monthly payments to a balance transfer card that is sufficient to pay off the entire transfer balance by the end of the 0% introductory period.

When to use your credit card for emergency payments
Credit cards can be used to pay for important services when an emergency arises. But before you add credit card debt, consider negotiating your bill to establish a better financing option than using a credit card.

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