-
1. Pay off your balance in full every month.
If you can afford it, paying your full balance every month will help you stay out of debt while getting the convenience of using a credit card.
-
2. Pay more than the minimum.
If you can’t pay the full balance, pay half. If you can’t pay half, pay something—but always more than the minimum. If you just pay the minimum it may take a long time to pay off your debt, and you’ll pay lots of interest. If you find that you can never pay off what you’ve charged, re-evaluate your budget.
-
3. Pay on time.
If you pay on time, you build good credit and avoid late fees. This means sending in your payment a week before it’s due or paying online, so you can be sure it arrives at the credit card company before the due date. If you pay your bill as soon as you get it, you’ll also avoid high interest rates. Some companies charge a higher interest rate when you pay late. This is in addition to late fees that can be $35 or more.
-
4. Never miss a payment.
Missing a payment is the worst thing you can do for your credit rating and it means you’ll pay the most fees and the highest interest. Missing payments can lead to more late fees and an increased interest rate.
-
5. Check your monthly statement.
Make sure your statement reflects what you purchased. If something shows up that looks unfamiliar, call your credit card company immediately.
-
6. Shop for the best deal on a credit card.
If you usually carry a balance, try to get a credit card with a lower interest rate. The higher the rate, the more you pay. Also, try to get a card without an annual fee, or get a card with an annual fee and a good rewards program (with cash back or store discounts). Also check the other fees like cash advance, late payments, over-the-limit fees. The EverydayMoney Credit Card Tool can help you compare the impact of these charges.
-
7. Maintain a low “Debt-to-Income Ratio.”
Make sure you only take on debt you know you can repay. If your level of debt gets too high, it can affect your credit rating. Lenders often look at the ratio of your overall debt to your income to see if you can pay your bills and still borrow.
-
8. Don’t apply for too many credit cards at one time.
Every time you apply for a credit card or loan, the fact that you applied will show up on your credit report. If you apply for too much credit at one time, it may look like you are in financial trouble and a lender may consider you a higher risk.
| | |