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How to Avoid Poor Credit Card Habits

HomeBusinessHow to Avoid Poor Credit Card Habits

Have you ever heard people talk about “good” debt vs “bad” debt? Credit cards are a form of debt–you’re borrowing money to pay for things with the understanding that you’ll pay it back on your monthly bill or over time. Your credit card habits determine whether this form of debt is good or bad. Do you know how to avoid poor ones?

Treat It Like a Debit Card

A debit card is a card that allows you to transfer money electronically from one bank account to another. Credit cards function similarly, except that the money the card moves isn’t yours. 

If you want your credit card to work for you, however, you should treat the money you spend using your credit card like it is yours. In other words, don’t spend more than you have. Avoid taking cash advances as well, since they tend to come with higher interest rates.

Pay Your Bill before the Due Date

It’s easy to think you’ll always pay your credit card bills on time. As long as you do, it should be fine to pay your bill on the due date, right? Unfortunately, life doesn’t always go according to plan. Sometimes websites don’t function properly. Sometimes bills get forgotten. 

Making payments on-time accounts for 35% of your credit score. Even one late payment can lower it. There’s nothing wrong with paying your bill before the due date though, which can save you a lot of trouble. Choose an earlier due date for yourself and pay on that day instead.

Pay It Off as Soon as Possible

If you look at your credit card bill, you’ll see a minimum required payment amount listed. While you certainly could stick with the minimum amount, that’s unwise. It’s better to pay your credit card bill off as soon as possible. This keeps your credit card usage low, another factor that influences your credit score. The best credit utilization rate is between 1%-9% if you want to improve your credit score as fast as possible, though anything under 30% can help you build your score. It takes a bit more work to keep your utilization rate in that sweet spot, but it’s worth the effort, considering all the ways having a good credit score benefits you.

Credit cards can be great tools, especially if you choose the right card for you. They can only work for you if you’re smart about how you use them though. Commit to developing good credit card habits. That way you can build your credit score and give your financial situation a nice boost.

Did you enjoy reading this article? Here’s more to read: How to Get a Lower Price for a Home

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