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Credit Cards 101: Do’s and Don’ts

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Most of us aren’t skilled in handling credit cards to begin with, which is why it is important to learn the basics before you even start getting your first card. 

Do:

Pay your bills on time. Establishing the habit of paying your bills on time is not only healthy for your credit score, but it also saves you from the unnecessary costs of late fees and finance charges. Plus, if you pay late, you will have to make two months of payment on your next due.

Differentiate your wants from needs. The biggest obstacle in keeping your credit in check is temptation. Make sure you resist every urge to buy something you don’t really need or can’t afford and differentiate needs from things you just want badly.

Let your creditors know if you cannot pay. If it’s impossible to pay on time this month, don’t just skip payments. Call your creditors and let them know you’re having difficulty and inquire if it’s possible to waive late fees or extend your grace period.

Stay below your credit limit. Low balances are easier to manage than higher ones. Not only that, but a good portion of your credit score is based on your credit utilization. The rule of thumb is to keep your balances within ten to thirty percent of your credit limit to maintain good credit score.

Negotiate for better terms. This is particularly important if you have pretty good credit and your rates are higher than the offers you receive. Evaluate your interest rates and other fees from time to time and try to obtain the best possible deal.

Don’t:

Pay only the minimum. By making minimum-only payments, you are just prolonging the time before the debt is paid off. You will also be spending much more in interests in the long run, since your payments will tend to go towards paying off finance charges instead of the balance itself.

Use your card for everyday purchases. By looking at your credit card as an extension of your wallet, you are quickly headed for debt. One of the signs that you are in financial trouble already is if you use your card to pay for everyday purchases such as food, clothing, and gas. To avoid this, leave your credit card at home and use cash to pay for these necessary purchases.

Charge things you can’t afford. One of the biggest mistakes you can commit is when you start thinking that it’s okay to charge an item you can’t afford now because you’ll be able to afford it later. If you’re short on cash today, what makes you think that you’ll have a lot of extra tomorrow? Unless it’s something really, really important, don’t use your card for things that are beyond your budget.

Just close any credit card. There are times when closing a credit card can have a huge impact on your credit score, especially if this card has a balance or is your oldest credit card. Make sure you know the consequences before you do.

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