You just got approved for a credit card. Congratulations! Using a credit card responsibly is a great way to help build your credit. But if you’re working to get an elite credit score you’ll need to know how to use a credit card wisely. There’s a few things you need to look at before getting a credit card. For example, do you have an introductory low interest rate? If so, when will the interest rate change? What are the conditions for the promotions and special offers? Is there an annual fee?
It’s really exciting to have a credit card but it’s very easy to fall behind so the first thing you need to know is you should be paying off your credit card in full every month. You’ll avoid interest charges, and it reflects highly on your credit report. Use your card frequently, but don’t overuse it. Frequent credit activity helps establish good credit, but increasing debt destroys it. It can be a fine line, but what it boils down to is this: if you use your card each month and pay it off each month, you’ll build good credit. If you use your card each month and pay off a smaller percentage of your debt each month, you’ll hurt your credit. You’ll need to avoid carryover debt from month to month.
If your credit card comes with rewards and perks, you may as well take advantage of them if it makes sense to. Read the fine print, because not all rewards are worth it. Some cards only give you rewards if you spend a certain amount of money or make a certain kind of purchase. If you’re spending more on purchases than you normally would, just to get a reward, you’re losing money and increasing your debt. Also, pay attention to deadlines. You don’t want to make that last qualifying purchase three days after the deadline! Know ahead of time if you’ll be able to take advantage of the promotions or rewards without getting into trouble.
You’ll get your credit score closer to your goal if you diversify your types of credit. There’s nothing wrong with having multiple credit cards, but taking out too many credit cards indicates that you’re relying on debt to get through, month to month. On the other hand, if you stay in good standing on multiple lines of credit, a mortgage, a couple credit cards, and a car loan, you’ll give a fuller picture of your reliability.
Read our blog to find out what you need to consider before closing a credit card!!
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