A lot of American consumers are looking for ways to manage their credit card use in such a way that they come out ahead. The problem is that a lot of consumers are falling into a spiral of debt as they miscalculate and make bad credit decisions. There are even times when they have the best intentions in mind but still, end up in debt.
Such is the case for a lot of consumers who are quick to point out how their credit cards are solely to be blamed for their financial woes. They put the blame squarely on their credit cards citing how the penalties and interest are starting to do some serious damage in their budget. The astronomical interest rates of their cards are not helping either.
However, much of the blame needs to be acknowledged by the consumer themselves. If you are one of them, you need to take a look at your credit card use. A lot of the problems can be traced back to how you used your card. As much as your credit card lenders are the ones imposing those high charges, it was a direct result of how you used your card.
Once you accept this fact, it is easier to move on and make changes to the way you manage your card use. You can start to assess and look for the common pitfalls that contribute to your credit card debt. This is an important step as Fox Business shares that the average credit card debt in the country is well over $16,000.
If you are looking for ways to manage your credit card debt, here are a few things you can start looking into.
Paying the statement in full every time
This is one of the cardinal rules when it comes credit card use because this usually determines if you will be assessed with multiple card penalties and fees. The temptation is quite big as you see a minimum payment amount in your statement. This is where the problem usually starts because you would rather pay for the smaller amount that the total figure.
However, you need to understand that doing so would allow creditors to start putting fees and other charges on top of your payments. The only way to avoid this is to settle the full amount every time. Apart from the fact that you will not have to stress out about the balance, it also saves you money from having to pay interest and other charges on your credit card.
Being smart with credit card rewards
There are instances when you could be carrying a couple of cards which you use for various purposes. One can be for gas, the other for groceries, and another one for emergencies. However, you might get caught up in compartmentalizing your expenses per card that you start to miss out on the credit card rewards.
This is one of the benefits of constant credit card use and one of the ways you get rewarded for your loyalty. However, spreading them out over multiple cards might make you miss out on some of the benefits of your rewards. Try limiting your cards to a small number and the more you use each of them, the more points you rack up and the better the rewards can be.
Making use of a household budget
This is one of those timeless pieces of financial advice that you would hear from almost everyone you would meet. It is for the simple reason that it works as well as people usually forget about it. One reason for this is that they usually stop after they develop the budget. Putting it together and following the same are two completely different things. Be sure to use your budget to help you manage your credit card usage.
Charging below the limit is a smart tactic for credit card use
One of the reasons operating below your card limit is to make sure that you are not overexerting yourself. That credit limit is not a challenge from your lender asking you to charge more than what they have approved. Apart from facing bigger penalties, maxing out your credit limit has been proven to be one of the no-nos of credit card use.
Experian also explains that keeping your credit card usage way below the limit helps improve credit utilization ratio. It might surprise you that this account to about 30% of your credit score computation. That being said, managing and keeping your usage to a manageable amount can help you budget and improve your score as well.
Keeping an eye out for better cards
Loyalty has it rewards especially when you are looking at how it affects your credit score. A big chunk of your score is dependent on credit history and your old cards can be a great asset to this computation. That being said, you should be able to balance that out with your present needs. Especially when you are trying to look at newer cards and how they stack up with your old ones.
For one, credit card debt consolidation works best if you are transferring debt over to a card with low-interest rates or even a 0% introductory offer. There might be other cards that can reward you better based on your credit card use. The idea is not to always keep on changing your card but simply keeping an eye out on those that could work to your advantage.
Keeping out of cash advance traps
Cash advance is a feature most credit card lenders offer consumers. It usually gets out of a sticky situation where you need cash fast. However, what you need to keep in mind is the fact that taking out a cash advance can pile up charges on your statement. These transactions have their own set of charges on top of what you would normally have on your card.
It does not help that there are people who see this feature as a lifesaver on a regular basis. Not knowing that they are being charged an arm and a leg in interest and fees once the monthly statement comes in. It is nice to have that option of being able to withdraw money on credit but try to explore other options first before taking that advance.
Staying on top of their account
Credit card use does not end after you have swiped and signed on the receipt. You need to monitor your card even after you have used it. This can help you protect your identity as well as make sure that you are only paying for items that you actually bought. One of the most effective ways to monitor your account is to go through your monthly statement.
The other is taking a look at your credit report. The Federal Trade Commission shares that the Fair Credit Reporting Act or FCRA allows consumers to get one free copy from credit reporting companies every year. Taking a regular look at your report can help you identify inconsistencies which you can address early on.
Learning from mistakes
No one is perfect and as you go through your finances and use your credit card, you will make mistakes. One habit that you need to develop to have a stress-free outlook with your card is to learn from those mistakes. Learn quickly and make sure that if it ever happens again in the future, you have learned your lesson and would be able to steer clear of trouble.
Credit card use could be a big factor in how you are able to manage your personal finance as you pursue your long term goals in life. Be sure to be on top of your card use take in habits that could lead to a stress-free financial journey.