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Tips on How and When To Use a Credit Card

November 16, 2018

Since the inception of credit cards as a widespread and acceptable payment option, credit cards have offered consumers a convenient way to purchase goods and services while only paying a single monthly bill. Back in its starting days, credit cards were a product primarily for the wealthy which could only be used to make travel or entertainment purchases.

 

Today, more than 70% of consumers report using a credit card, according to a 2014 survey done by the Federal Reserve Bank of Boston. The consumer experience has also changed drastically, with more American shoppers making their purchases online rather than in store.

 

With special online discounts and the convenience of shopping from your laptop or phone, it can be easy to overuse a credit card. Additionally, if you don't monitor your spending, you can easily find yourself with a large amount of debt. So when should you use your credit card? How do you build credit from it?

 

Below you will find the answers to these questions and other essential tips for credit card usage.

 

1. Always pay your card on time and in full. 

 

Late payments will reflect poorly on your credit score and could result in penalty fees or additional interest fees. Additionally, carrying over unpaid balances from a previous month could eventually result in accumulating debt. Timely payments help you build your credit.

 

2. Pay the minimum amount due if you can't pay in full.

 

If your due date comes before your next paycheck and you aren't able to pay off the entire balance, you should at least make the minimum payment. It's always wise to make a payment on time, this way you avoid any penalty or interest fees. Once you have the funds, pay off the rest of your balance.

 

3. Try not exceed more than 30% of your credit line.

 

Whatever balance is shown at the end of your billing period is divided by your credit limit to get a utilization ratio. The higher the ratio, the more poorly it reflects on your credit.

 

4. Think of your credit card as a temporary loan - not as spare money.

 

Use your credit card for small to medium purchases such as for gas or dining out. Never use your credit card for impulsive purchases for items that are above your budget and which you won't be able to pay off.

 

A credit card should be used as a budgeting tool to help track your spending. Good credit habits will allow you to have more control of your budget and can help you qualify and generate savings for larger purchases in the future, such as a home loan.

If you have any questions about finance, loans, credit, mortgage or obtaining funding, please call MLO Financial at: 949-612 0981 - Or learn more info here - https://www.mlofinancial.com/lending

 

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