Credit cards, with convenient payment features, are no longer strange to us. However, if you don’t know how to use it properly, risks such as missing payments or debt accumulation can keep you up at night. Don’t worry, ILLUME eMAG will tell you a few tricks on how to use the credit card properly.
- Tracking monthly expenses
Using a credit card for expenses can sometimes cause you to spend money without holding back. Hence, the total amount that you owe the credit card company increases. In the end, you will see a huge number on top of the closing balance bill. So, keep an eye on how you spend.
You can write down your credit card payments in a notebook or use the notifications from apps to adjust your budget. However, the key here is that you have to really focus on taking control of your finances.
- Owing less than 30% of your credit line
In addition to paying attention to your weekly expenses, you should also check your line of credit (a preset borrowing limit that can be tapped into at any time) and only owe up to 30%. For example, if your credit card allows for $5,000 in debt, you should only use $1,500 (30 percent).
Having a lot of credit debt is not a good idea, as it reflects on your credit score. If the number is higher than 30%, lenders will think you are not responsible for your credit or facing the risk of default, thereby lowering your credit score and causing difficulties in loading money (if needed) in the future.
- Paying your balance in full at least once per month
Try to pay the full balance each month because, otherwise, your credit score will be reduced. The higher your credit score, the easier it is to get a loan from the bank. So, never miss your monthly payment.
If you’re forgetful, you can sign up for automatic payments; just make sure you have enough money in your bank account to pay your bills (this is where weekly spending tracking comes in handy).
- Checking bank statements monthly
Another important habit is to closely follow your bank statement. Errors like a wrong invoice or an unconfirmed charge being added to your account can still happen. Using the expense notification function is helpful, but at the very least, you should still make sure you check and confirm your monthly statement yourself. The sooner the error is discovered, the easier it will be to fix.