So if you have to pay, you can easily get into financial trouble quickly.
Pay your bills on time and keep your credit utilization below 30%. These two initiatives will help ensure that your credit card helps you build credit instead of hurting your credit score. Paying your bills on time is critical because your payment history is the most important factor in determining your score. Keeping a low ratio of used credit to available credit gives lenders confidence that you know how to use your card responsibly.
Choose a rewards credit card that matches your spending. Many cards offer rewards for certain types of purchases, such as shopping at the grocery store. If you tend to spend more money on certain expenses, such as travel, then you’ll want to look for a card that offers you extra rewards for such purchases.
If you use your cards in this way, you may end up being better off financially for having them.
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These are the worst ways
There are some bad ways to use your card, too. Specifically, the worst ways include using your credit card to fund a lifestyle you can’t afford and being irresponsible about the fees you charge and the charges you pay.
Too many people end up using their credit cards to buy luxury items or pay for non-essentials like vacations. Unfortunately, this can create a very difficult situation.
As your balance increases, your interest costs will continue to rise because you will be paying interest on a larger principal balance. Minimum payments are usually low, but since credit card interest rates are so high, most of the money will go to interest payments. All of your purchases will end up costing you more, you will be taking more and more money out of your minimum payments, and you will have a harder time being successful.
You definitely don’t want to make this mistake, forget to pay or max out your credit card when you use it, because doing so can hurt your credit score. By avoiding these cardholder behaviors, you can ensure that you benefit from being a cardholder.
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