Using Credit Cards Wisely

I’ve had my credit card for almost 6 months now, and it’s a great feeling to know that I’ve used it wisely enough to not have to pay a dime in interest so far. The only way to do this is to pay the balance off every month. And so I have. But here comes my admission:

It’s not only wise to pay off your credit card every month but it’s wise to not put more on there then you can realistically handle for that month without having to cut other things in your budget.

The reason I bring this up is because though I’ve paid off my card every month I’ve had to forgo a few of my payments to myself (aka: savings) in order to make sure I didn’t receive any finance charges. Of course, it was worth it to me since I already had some saved up to go ahead and pay off the card but at the same time I wish I wouldn’t have put so much on there. Was it too much to handle? No. But then again, it was! Because I wasn’t able to do the thing I want to do the most for a few weeks: pay myself!

But as of today I’m back in the game. My credit card balance is back to 0, still no finance charges, and I am ready to pay myself first when my next paycheck comes in. It will be a nice feeling to see my emergency fund start to build.

Obviously, my position is GREAT compared to some but I try not to compare myself to others. I compare myself to well, myself and the goals and position I’d like to be in. And for a little bit there I was falling short of that.

So here’s to using credit cards wisely:

1. Pay off the balance in full every month. I know, it’s said over and over and I’ll say it again. If you don’t have the money–don’t buy it!

2. Put a plan in place. If you don’t have a plan in place, you need to get one! Decide on what you are going to use your credit card for. Is it for gas? Is it for all your expenses? Is it just for special times like vacations or other trips? Whatever it is, keep it simple and stick with it.

3. Watch little expenses. Depending upon your plan, it’s still easy to put things on your credit card without thinking twice. I realized 2 months ago that the majority of my balance (which wasn’t much but still…) was food. Food?? Why didn’t I just pay that with my debit card or cash? I don’t know the answer to that but I wish I wouldn’t have. It’s just unnecessary stuff and definitely out of my “plan.” =)

Building Credit with a Credit Card

Last week I hung out with an old friend, and I mentioned in passing how I had gotten a credit card recently in order to build credit. His response was one of disbelief that I would stoop to such a level.

At first I was a little offended but quickly realized he thought this was crazy because so many people act stupid with them. But the good news is YOU DON’T HAVE TO!! =)

Credit cards have gotten a bad rap recently–especially among young people who actually want to be smart with their finances. So many students just stay away from them completely. Which is a viable option.

Bu unfortunately, for those people, if they have no other credit history, when they do choose to go out and buy a house or try to get any other kind of loan, their rates will be much higher than those who had built up good credit for themselves.

So that’s why I got a credit card. They are not immoral. Or moral. They are….amoral. It’s just a piece of plastic that if you take care of like you do the rest of your finances will actually help you in the long haul because it will prove to the people you want to loan you money that you will pay them back–and on time.

So for those young people who have no credit history and would like to build it–go ahead and consider a credit card. But here are some dos and donts you absolutely must follow:

1. Do find the right card. For your 1st card it doesn’t have to be anything fancy, schmancy with lots of rewards and a high credit limit. Find something simple and boring. You will have time to become financially secure and smart enough to get a cool card with cash back rewards and jazz in the future. Things to watch for: interest rate (low), annual fees (none), grace periods (you want to be able to pay your balance off by the due date without any finance fees.)
2. Don’t carry a balance. Just don’t do it. If you put money on the card, keep the money in your savings or checking account to pay it off at the end of the month. Forget all together looking at the “minimum payment” box. Just pay off the balance. Every time. =) If you do this, you will not even have to worry about the interest rate because you won’t be paying any!
3. Do decide what you’ll use it for. I usually decide for that month I will use it for ____ (sometimes it’s gas, groceries, etc.) You can use it for whatever you’d like but decide ahead of time so you won’t go overboard with it. But like I said…you’re using it as a substitute for the cash you already have in your checking account. Not because you don’t have the money and you want whatever it is right now.
4. Do pay it on time. Every time. There’s really nothing worse than making a late payment on your card. Pay it at least a week an advance to steer clear of this TRAGEDY. (And it is a tragedy…it will stay on your credit report for probably 5-7 years.)
5. Don’t go over half of your credit limit. Have a limit of $1,000? Stick to under $500. I’m not the credit bureau, and I don’t know why if you go over half your limit it makes your credit score go down, but it does. So…even if you’re planning on paying it off at the end of the month (which I know you are!) don’t go over half your limit.

Five easy things to remember to build credit and help your credit score get higher and higher. The higher the score, the more people will want to loan you money and the more things you can accomplish and dreams you can see fulfilled!