4 Financial Principles that Show How to Protect Your Credit After All That Holiday Spending

     Credit cards have become one of life’s most basic necessities.  However, many people aren’t really familiar with how credit cards work, and just how much of an impact they have on financial success.  Even though it can be intimidating trying to figure out credit, there’s no need to avoid it altogether.  Credit cards are actually very helpful when used sensibly. Technology Writer Amy Bergen suggests that “If you can use a credit card responsibly, there’s really no reason not to. They offer rewards, protection, and convenience, and report information to the credit bureaus – making it easy for you to build your credit.” Here are a few tips on the proper way to use credit cards:

1.    Pay Your “Minimum Balance Due” On Time – Every Month:

               Every time you use a credit card to pay for something, the bank which issued the card starts a running tally of your spending. They also set up a monthly payment schedule which requests for a fraction of interest on the overall balance of the running tally. No matter what happens, do not miss the bank’s deadlines for these monthly payments. These monthly payments are used to construct your payment history and credit score.

2.    Keep Your Credit Utilization Low:

               Whenever banks issue out credit cards, they also specify a ceiling on how much can be spent using a card. This ceiling is known as a credit limit. No matter how high your credit limit is, budget your spending so that you don’t use more than 30% of the approved credit. This is how you keep credit utilization low. Credit utilization is the amount of money you spend, in comparison to the total credit limit on your card.

3.    Don’t Apply for Credit Cards Randomly:

               Credit cards might seem like they help people spend money. But they actually help people borrow money. This is because credit cards are a representation of debt. Not cash. If you’re going to apply for a credit card, make sure it’s a card that you’re actually going to use responsibly by paying it back. Applying for credit just because you can, increases the chances of taking on unnecessary debt.

4.    Beware of Closing Your Credit Cards:

               Even if you make a decision to stop using credit cards, avoid the act of physically contacting your bank to cancel a card. Cancelling cards has the effect of shortening your credit history. This is because when a card is canceled, the timeline of repayments associated with that card is eliminated from your credit profile. Depending on your financial reputation, this could also lower your credit score.

Conclusion:

               Every time you swipe a credit card, you’re doing a lot more than spending money.  Your actions contribute to an invisible file which keeps track of whether or not you’re a responsible borrower.  This is why it’s extremely important to be disciplined when using credit cards.  Stay informed about the overall balances on your cards, make punctual surplus payments on these balances, and don’t be frivolous about what you purchase using credit.  If you like what you just read from our blog, you’ll love the various informative courses, workshops and events listed on our websites and social media. Whether you’re interested in personal development, or overall improvement of your business, give us a call at 1 (888) 823-7757 to find out how The RISE Academy can help you break past your daily struggles and start soaring in success.