10 Basic Tips for Using Credit Cards

Credit cards can be a great way to make purchases and gain some excellent perks. However, credit cards can become a nightmare if handled incorrectly.

In fact, there is about $784 billion in outstanding credit card balances in the United States, and only 45% of credit card holders pay off their balance each month.

Want to make sure that you use your credit card correctly?

10 smart steps that you should follow

1. Stay Under 30% of Your Credit Card Limit
   Just because you have a $5,000 credit card limit does not mean that you should spend all of it. That is because your credit card usage rate figures into your overall credit score. 

 According to the three credit reporting agencies, you will want to keep your credit card usage under 30%. This will help keep your credit score high. This will also protect you from spending too much on your card.  

2. Pay Off the Full Amount on Time
   As stated earlier, only 45% of credit card holders pay off their balance each month. When you hold a balance for a long enough time, you will have to pay interest. Some credit cards charge up to 29% per year. That works out to over 2.4% per month. 

 For example: Let us say that you have $3,000 on your credit card that is not paid off. If you have a 29% APR, you will end up paying about $72 a month interest alone. That is $864 per year in interest payments alone. 

3. Keep Track of Your Purchases
   It is a good idea to keep track of your purchases in order to ensure that you don't spend too much. You can keep track of your credit card purchases by accessing your account online or using the credit card company's phone automated system. Make it a habit to check your purchases at least once per week.  

4. Set Up Automatic Payments
   To ensure that you do not miss a payment, you can set up automatic payments. Automatic payments can be set up in just a few minutes, either through your bank or directly with the credit card company Each month, the payment will be automatically deducted from your bank account. Be sure there’s enough cash on hand to cover the payment, overdraft fees can eat any savings you may realize. 

5. Check Your Statement on a Regular Basis
   In addition to checking your purchases, you will want to check your monthly credit card statements. Most credit cards send statements that are accessible online or on the credit card's website. Your monthly credit card statement will give you an excellent overview of your spending habits.  

6. Redeem Your Credit Card Rewards
   Some credit card companies come with a rewards program. Be sure to check all the rewards that are available from your card. Here is a look at some of the most common credit card rewards available:

• • Cashback
  • Credit card points (these can be redeemed for rewards)
  • Airline miles

Be sure to redeem your rewards. Doing so can help you get more value from your credit card.

7. Take Advantage of the Extra Perks
   In addition to credit card rewards, you can also gain access to several perks that can offer you convenience and value. Here is a look at some of the most common perks that you can find from popular credit cards:

• • Insurance on rental cars
  • Introductory rate period
  • Discounts on gift cards 

8. Know Your Fees and How to Avoid Them
   You do not want to get hit with fees with your credit card. Sadly, some credit card companies are good at setting up "traps" that can cause you to end up losing money in fees. Here are some of the most common credit card fees that you should look out for: 

• • Annual fee - This is the fee charged each year to use the card. You can avoid this fee by choosing a credit card with no annual fee. However, many cards that don’t charge an annual fee also don’t offer rewards or card perks. Be sure to know what the card offers before you send in the application.
  • Late payment fee - This is the fee you are charged when you fail to make the minimum monthly payment. You can avoid this fee by setting up automatic payments. 
  • Finance charge - This is the fee you pay when you hold a balance on your card over a certain period of time. You can avoid this fee by paying off your credit card each month. 
  • Balance transfer fee - This is the fee you are charged if you transfer a balance to your card. You can avoid this fee by choosing a card with no balance transfer fee.
  • Over-limit fee - This is the fee you pay when you charge more than your card's limit allows. You can avoid this fee by setting up a balance alert. 
  • Cash advance fee - This is the fee you pay when you withdraw money from an ATM with your card. You can avoid this fee by using a fee-free ATM. 
  • Expedited payment fee - This is the fee you pay to quickly have the credit card company process your payment. You can avoid this fee by paying by the credit card due date.
  • Foreign transaction fee - This is the fee you pay when using your card overseas. You can avoid this fee by using a card with no foreign transaction fee. 
  • Returned payment fee - This is the fee you pay when the bank returns your credit card payment. You can avoid this fee by ensuring your bank account has enough funds to pay the credit card balance. 
  • Card replacement fee - This is the fee you pay to replace your credit card. Usually, a bank will allow you to get one free replacement card per year. You can avoid this fee by explaining that you will not start using your other card if you need to pay a replacement fee. Some credit card companies may waive the fee.  

9. Set Up Balance Alerts
   Setting up a balance alert will help you avoid hitting the upper limits on your credit card. The alert can be sent to your phone as a text. Also, you can set up the exact amount of spending that will trigger the alert.  

10. Download and Use Your Credit Card's Mobile App
    Most credit card companies offer an app that you can download and use while you're on the go. With the app, you will have fast access to your account information and any credit card services that you would like to use.  
    
    

Making the Most of Your Credit Card

By following some commonsense rules and taking advantage of what your credit card has to offer, you will be able to enjoy the many benefits that buying on credit has to offer. Be sure to check your credit card rates and rules to ensure you are making the most of your current credit card.