Tips on how to use a credit card

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Credit cards have become a vital part of financial life. They are integral in helping you to build a credit history that will enable you to obtain other lines of credit such as car loans and mortgages. But for some people, the temptation and instant gratification of “buy now, pay later” is too much. They soon find their debt load spiraling out of control. Don’t let that happen to you. Here are some tips on how to safely use your credit card:

Don’t spend more than you have. Look at your income and your monthly expenses. Deduct how much you have to spend on utility bills, insurance, and other financial obligations to determine how much you can afford to spend on your credit card. Remember that although your credit card is plastic, the money you spend with it is real. Your credit card company will give you a limit on how much you are allowed to spend, but that doesn’t mean you can afford to spend that much. Impose your own personal and reasonable credit card limit and stick to it.

Pay on schedule. In addition to receiving your credit card statement in the mail, you can also request an online notification of when payment is due. Mark this date on a calendar and make a commitment to yourself to pay in full and on time. Late payments lower your credit score and may also incur a late payment fee, yet are easily avoidable. And remember, the longer you carry a balance on a credit card, the more your purchases will end up costing due to the interest you will be charged each month on the outstanding balance. If you need to make a large purchase with your credit card, be sure to create a plan to pay it off as soon as possible.

Build a credit history. It’s important to build a good credit history with your credit card company. One way to do this is to use your credit card, say, for gas purchases only. This way, you’ll be spending your money on something that you have to buy anyway, and will begin to reap the benefits of establishing yourself as having a solid history of regular charges and repayments. This positive credit history will help you get loans and other lines of credit. Using a credit card wisely is one of the first steps in establishing your financial profile.

Start small and spend smartly. By starting small and maintaining a regular repayment schedule, you can stay in control of your finances. Just be sure not to succumb to the temptation of credit cards or you might do yourself more harm than good. Be honest with yourself about what you can truly afford so you can decide how to use credit cards to best meet your financial needs.

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