Have Credit? Seven Ways to Use Credit Wisely

• By Sarah Hall
• August 15, 2016
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Household debt can be a constant worry for many Americans, who agonize over how they’ll cover everything from daily bus fares to their rent or mortgage. The good news is that fewer households have debt, according to a report from the U.S. Census Bureau. The bad news: The households that do have bills have more.

Debt can come in many forms -- car loans, mortgages, student loans, medical debts and, of course, a big one -- credit card balances. About 38 percent of Americans carry credit card debt. In May 2016, they owned about $953 billion, according to the Federal Reserve. That number covers the nation’s revolving debt, which is primarily made up of credit card charges.

When used properly, credit cards come with plenty of benefits. They are convenient and can play an important role in building credit scores, which are critical for securing loans for a house or car, for instance.

But, it’s also easy for credit card spending to get out of hand … and that can be costly. According to creditcards.com, the average interest rate for a credit card is 15 percent. If you fail to pay off your balance monthly, your costs for the items you purchased on credit will increase exponentially.

Here are seven ways to use credit wisely:

1. Don’t be seduced: Those credit card solicitations that come by mail might look pretty good, but don’t bite if you already have cards. Most consumers need just one or two major credit cards.

2. Keep the charges low: Be sure that your balance is always below 50 percent of your credit limit. In fact, hold off on regular purchases until you have the cash. Step away from those impulse buys.

3. Pay in full: Always plan on paying your full balance each month. If you can’t cover the full amount, cover more than the minimum payment and then scale back your spending so you can pay off the debt as soon as possible.

4. Read and record: Read the fine print so you understand the various fees that come with your card and you’re not surprised. Always keep a record of your purchases so you don’t top the limit. And, put the account numbers and contact numbers in a safe place in case your card is ever misplaced or stolen.

5. Take control: Once you’ve shown the company that you can make good on your bills, ask them for a lower interest rate. Don’t fall for their ploys. If they offer you a higher credit line, decline. More credit often leads consumers to charge more … and carry more debt.

6. Put it away: To keep the card from being cancelled because of inactivity, you’ll need to use it once every six months or so. So, buy something small with the card and pay the full bill, then put it in a safe spot for another day -- about six months from now.

7. Make a date: Set an annual date to request a copy of your credit report. Examine the report so you can question any wrong entries or bad information.

As long as you control your credit cards -- and your spending -- you’ll ensure that those credit card balances don’t control you.

The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out, and stay out of debt.  For a free debt analysis, contact us and find out how we can help.