Being a responsible credit card user is good for your bottom line. Responsible credit card use improves your credit score, allows you to get the most from your reward credit cards, and can help provide a credit safety net for future purchases and unplanned emergency needs. But what does being a “responsible credit card user” actually mean? And even more importantly, how can you be sure you’re practicing responsible credit card habits?
1. Make your payments on time
Set up auto-pay or set up an automatic reminder to make sure every single one of your payments are paid by your credit card’s due date.
2. Be mindful of credit purchases throughout the month
This allows you to be sure you haven’t had any unauthorized purchases and also ensures that you haven’t spent more than you can afford to pay each month. Do not wait until your bill comes to examine your purchases for the month.
3. Use technology to make your life easier
Sign up for your credit card company’s online payment system and sign up for paperless billing to easily examine purchase history and be aware of any problems in your immediate credit history or usage. Also, sign up for reminders via text messages or email. Some reminders that can typically be set are reminders for payment due date approaching, approaching credit limit, and purchases over a predetermined amount (which you determine). By setting these reminders, you won’t be caught off guard by an approaching payment and you’ll be more mindful of large purchases.
4. Pay your entire balance each month
Paying your balance in full allows you to reap the most benefits from your credit card. Paying the minimum or anything less than the full amount means interest charges, which will reduce any benefits you’ve realized with a reward credit card. Think of reward points as a monetary equivalent. If the reward points you have accumulated would allow you to put $X toward your credit card bill but you are paying $Y in interest each month, subtract Y from X to find out the actual monetary value of your rewards each month. Overtime, paying less than entire balance may leave you with an actual benefit of $0.
5. Read the fine print
Read your user agreement and any updates that occur while your credit card is active. Be aware of your interest rate. Know your credit card perks and how to cash-in on these perks. Be aware and mindful of your credit limit. Most importantly, find out exactly what actions may result in negative responses from your credit card company, like default interest rates, closing your account, etc. and never step over any lines that would result in these negative actions.
6. Use a reward card
If you purchase items with a credit card, why would you choose to not get rewarded for those purchases? We’ll skip the 20 different points to consider to determine which reward credit card is right for you and suggest that you should be using Reward Summit to figure this out (see #3 – Use technology to make your life easier).
7. Use your card regularly
Credit card companies may cancel your card if it isn’t used regularly. Find out what the rules are for your credit card and set up an automatic payment, like a reoccurring bill to make sure you are in compliance with your credit card company’s rules.
8. Don’t cancel your credit card
In some cases canceling your credit card may actually hurt your credit. Unless the credit card has a fee, keep the credit card and schedule an automatic payment to make sure it is used on a regular basis.