Tips For Keeping A Credit Card In Good Standing!
It is no secret that credit cards are a very important financial tool to many. This is why it comes as a surprise to me that the proper use of credit cards is not a class that is taught in school. Because improper use of credit cards is one of the leading causes of financial hardship in the United States, I feel that it is very important that I explain how to keep credit cards in good standing. With that said, there are a few rules of thumb that people should remember when using credit cards. Here they are:
Tip #1: Keep Control Of Your Balances: I want to start this tip by saying that no one will ever know your financial situation like you do! With that said, credit card spending limits are the maximum amounts of money that lenders are willing to allow consumers to borrow using their credit cards BASED ON THE BANKS ANALYSIS OF YOUR FINANCIAL SITUATION! Unfortunately, often times, the banks get this wrong. Therefore, when using credit cards, a general rule of thumb that consumers should follow is to keep their credit card balances low enough that they are comfortable with their ability to pay the entire balance within 3 months! Also, consumers who are facing financial hardships tend to spend more than 50% of their credit limits on their credit cards. Therefore, if you do the same, you may be displaying signs of financial hardship to credit reporting agencies and this may harm your credit. Therefore, it is a best practice to keep credit card balances below 50% of the credit line.
Tip #2: Make Early Payments: Most consumers that use credit cards work day today. With that said, many of these consumers know what it feels like to get a paycheck early. Well, lenders like this feeling as well. By sending credit card payments early, you will display financial strength to lenders and credit reporting agencies alike. Also, making payments on the due date may cause them to be processed late due to delays in the mailing system or the processing system. When using credit cards, it is a best practice to make payments at least 2 weeks in advance to avoid the head ache!
Tip #3: Never Pay The Minimum Payment: Minimum payments are just that! They are the minimum amount of money that lenders are willing to accept as a payment on credit card debt. However, the minimum payment does not represent the maximum amount of money that consumers are allowed to pay. There are many benefits to making more than your minimum payment. First, by paying more than your minimum payment, you will show signs of financial strength to lenders and credit reporting agencies. Also, by paying more than the minimum you will avoid possibly thousands of dollars in interest and finance charges. Finally making more than the minimum payment will cause you to pay off your debts early! It is a best practice to try and double your credit card minimum payments.
If you follow these three rules when using credit cards, you can be sure that you will not suffer a financial hardship as a result of your credit card use. As a matter of fact, this will help to improve your financial situation by building up your credit score! It really is a plus, plus!
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