It feels great to be approved for a credit card. An even better feeling when the credit line is high. However slip ups such as missed payments and high recurring balances can reap disastrous results. I wish someone gave me advice on what to do and what not to do regarding credit cards. To help you, we have put together a quick summary with everything you need to know about managing your credit card(s) effectively.
1. Low Utilization
Never carry a balance on your credit card. If you cannot avoid this, then try to ensure that the balance you are carrying over is no more than 10%. For example, if your credit card limit is $1,000. You should pay down the balance to $100 if you are not able to pay it off in full. You want to keep your utilization as low as possible. Keep in mind however that Carrying a balance also means paying interest and giving away your hard earned cash.
2. Pay on Time.
Trying to distinguish between when to pay your credit card and when the balance is reported to the credit bureau can be confusing. The first rule here is to pay your credit card on or before the due date. The easiest way to guarantee this is to enroll in auto pay. Your monthly balance is automatically paid on your credit cards' due date. Your due date is always listed on your credit card statement as well as your online account. Your credit card company will send a report to the Credit Bureau within a few days following your due date. This report details your credit card balance as well as the cards’ limit.
If like me, you have several credit cards, it is worthwhile to sign up for a free financial tracking software such as Mint.com. Mint provides you with constant reminders every month of your balance as well as your credit card due date. This way, you never miss a payment.
3. Credit Limits and Affordability
Your Credit Limit is the maximum allowable amount that you may spend. You should never charge more than your card’s limit. Doing so will most likely result in the card being declines and an embarrassing situation during checkout. In the small chance that this does happen, be sure to make arrangements to pay this off as soon as possible. You should only charge what you can afford. Thinking of buying the latest iPhone? Sounds great except if you do not have the funds to pay off the balance before the due date, don’t buy it. Don't create headaches for your future self. Use your card responsibly and pay it off accordingly.
4. Credit Inquiries
Whenever you apply for a new credit card or request a credit line increase, your credit file is pulled for review by the credit card company. This is referred to as a Hard Pull or Credit Inquiry. This has a strong impact on your credit score and takes 2 years before it is removed entirely from your credit report. Our recommendation is that you do not apply for several new credit cards within a short period of time.
The Writer can be reached by email at: Deana@organikcredit.com
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