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Finance 101

Using Your Credit Cards Responsibly

Posted on February 03, 2017 by Jake Ward

Credit cards offer the ultimate in convenience. They can be used anywhere, in-person, over the phone, and online. And, they come with valuable features including enhanced security and zero liability for fraudulent transactions.

But that convenience also has potential consequences. Many people get a credit card with the best of intentions but end up abusing their purchase power and get into debt troubles as a result.

Here are a few tips for using your credit cards wisely.

Spend only what you can afford to pay back each month.

Use your credit card as you would a debit card. Don’t spend money you don’t have and end up paying a ton in interest. Your goal should be to never carry a balance. This will allow you take advantage of the benefits your credit cards give you, without increasing your debt load.

If you have to carry a balance, make at least the minimum payment on your card each month. Pay more than the minimum whenever possible – this is really the only way to pay down the balance and minimize interest expenses.

If you carry a balance on more than one card, pay off balances on cards with the highest rates first. Consider making minimum payments on your lower rate cards and maximizing the payment to the highest rate card each month.

Don’t spend more than 30% of your credit limit.

There are many different factors that make up your credit score. The ratio of available credit to the amount of credit you are using has significant influence on your score. Keeping your credit card balance under 30% of your limit positively impacts your credit score. For example, if you have a credit limit of $1,000 on your card, keep your balance under $300 at all times.

Pay your bills on time.

This should go without saying, but is critical to your financial success. Know when your bills are due each month and never skip payments. Set up auto pay or recurring calendar reminders to avoid late fees.

Be careful of what you close.

It may tempt you to close cards you aren’t using. But be careful. Cancelling an older card, or closing an account that you don’t use, can actually negatively affect your credit score. Lenders care about your credit history. The longer that history, the better. So keep your old accounts open even if you don’t use them. You’ll most likely want to close any credit cards you don’t use that charge an annual fee.

Read the fine print.

Different credit cards have different terms. Some charge annual fees. Some charge for balance transfers, cash advances, or going over your credit limit. Some have different grace periods. Know what your lender offers.

There is a big difference between R.I.A. FCU’s credit cards and others out there. The credit union has no annual fee, no cash advance fee, no over the credit limit fee, and no minimum finance charges. We include a 25-day grace period, rental car coverage, and other benefits as well. And, most importantly, R.I.A. FCU’s credit cards have low interest rates.

Go for the rewards!

Many credit cards come with tremendous benefits including rewards such as cash back, rewards points, or airline miles. If you are going to be spending money anyway, you might as well get something back. Just be wary – some rewards cards come with hefty annual fees. The rewards programs may still be worthwhile, you’ll just need to use the card frequently to benefit the most.

Check out R.I.A. FCU’s Visa Rebate Rewards. Earn up to 1% cash back on all of your purchases with no annual fee!