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Colony Associates Shares 7 Ways to Be Smarter When Using Credit Cards

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Many people are under the impression that using credit cards is irresponsible. However, the truth is that with proper spending habits, using a credit card can improve your financial standing and build a healthy credit score. Read on for the best ways to make credit cards work for you.

1. Monitor Your Spending

It’s easy for it to seem as though money is here one day and gone the next. However, part of responsible credit card use requires you to keep an eye on your spending. With credit cards, it’s far too easy to swipe away without realizing just how much your spending. If you continue with this type of practice, you’ll soon find that you’re in way over your head with an ever-growing credit card bill that you can’t seem to pay off.

Instead of whipping your card out every chance you get, be mindful of your spending. Only purchase items that you already have the money for and what you can pay back immediately if need be. This way, as you use your card more frequently, you’ll already know you won't have to scramble to make ends meet when the bill is due.

2. Pay Your Bills on Time

When it comes to proper spending habits with credit cards, it’s essential that you pay all your bills on time. Ideally, it’s best if you pay your bill ahead of time to make sure you completely avoid any late fees and additional interest charges. Experts from Colony Associates suggest that cardholders set up their checking accounts to pay off their balance every payday.

It’s best to pay your credit card off in full every month to make the most of your rewards points and avoid interest. However, if you aren’t able to pay off your entire credit card balance every month, make sure you pay the monthly minimum.

3. Maximize Credit Card Repayments

Even if you are making an effort to pay your credit card bill on time, you may not be making the best decision for your finances. If you’re having a hard time paying more than your minimum monthly payment, it may be time to switch to a card that has a low-interest rate. When you’re able to pay off more, you won’t have such a high amount of interest added to your bill.

4. Set the Right Credit Limit

In addition to paying off your credit card bill on time, it’s also imperative to set the proper credit limit before you ever start spending in the first place. When choosing what credit limit is best for you, consider an amount that is easy for you to repay. While you may be tempted to choose a credit card with a higher limit, this is an easy way to trap yourself into spending more money than you can afford to repay.

As you continue to use your current credit cards and make payments each month, it may be time to increase your limit. According to Colony Associates, it’s best to avoid increasing your credit limit if you’re not able to pay off the balance in full every month. Some credit card holders even find that reducing their credit card bills to just once a month makes it easier to meet their monthly payment with lower interest rates.

5. Close Credit Cards Properly

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When you make the decision to stop using a credit card make sure you take time to close them properly.

While cutting up a credit card may seem like an effective way to stop yourself from using it, there is a proper way to close a credit card. By closing your credit card accounts properly, you’ll be able to not make sure all penalties and fees are no longer in effect. Moreover, this way you can protect yourself from potential fraudulent activity if someone obtains your card details.

Credit cards can be canceled by phone or online. If you're canceling by phone, simply call the credit card provider to get them to close your accounts. If you’re canceling online, be sure to pay off your balance, review pending transactions, and cancel direct debits. Keep in mind that the length of your credit history will be used to determine your credit score, so think carefully before closing your account.

6. Avoid Cash Advances

Many credit card companies entice applicants by offering them cash advances. While cash advances can come in handy in difficult situations, these advances have higher interest rates. If you aren’t in an emergency situation, it’s best to steer clear of these types of advances. It's better to build your savings to make sure you’re properly prepared for every situation rather than expecting to rely on cash advances for emergencies.

7. Pick the Right Card

Part of smart credit card use starts with choosing the correct card to meet your needs. Cardholders that are confident that they can pay the balance off in full will benefit the most from their rewards points. This way, cardholders can cash in on frequent flyer miles, discounted accommodations, and gift cards to local stores. With interest rates no longer a concern, you’ll be able to spend wisely and collect the savings as you do.

Using credit cards should be a regular part of your life. As you work to use credit cards responsibly, be sure to keep these tips in mind.

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