On average, Americans carry about $6,000 in credit card debt and that 42% of all households carry some credit card debt. Thanks to the American economy’s current state due to the global pandemic, many Americans are purchasing more on credit than in years past.
However, being responsible with credit is imperative to maintaining a healthy credit score, keeping debt low, and enabling you to get credit at low-interest rates.
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In this article, we will take a look at how it is best to manage your credit cards, so debt doesn’t get out of control and keeps your credit score at the upper end of the scale.
Pay Cards Off at the End of the Month
Stated by a credit repair Houston specialist, the trap many people get into with credit cards is using them like a monthly payment plan to pay off purchases. The problem with this practice is that it can take years to pay off a balance if you pay the minimum payment because of the interest. That’s why experts recommend that you never charge more than what you can pay off at the end of the month. And when the bill arrives, pay it in full to avoid those interest charges that pile up each month you carry a balance.
Avoid Late Payments
Late payments are a surefire way to send your credit score in the wrong direction. Besides damage to your credit score, many lenders charge a late fee, which puts you deeper in the hole, and makes it more difficult for you to get credit in the future. Also, some lenders increase interest rates on habitual late payers.
The best way to avoid late payments is by setting up autopay. Even if you’re paying the minimum amount each month, autopay ensures you’ll always make your payments on time and avoid late fees.
Avoid Minimum Payments
Too many people fall into the trap of making only the minimum payments each month, but as we stated above, it can take years to pay off a balance when you only pay the minimum, and you end up paying more in the long run. Making the minimum payment keeps your account in good standing and helps you avoid late fees, but that’s about all it does.
If you can afford to do so, pay twice the minimum amount each month to cut your repayment period in half.
Use Rewards Cards
If you’re one of those who uses a credit card for most of your purchases, consider getting a card that gives you rewards such as cash, airline miles, or retail points.
Keep Debt Under 30% of Your Credit Limit
Another way to damage your credit score is to carry a high debt to credit ratio, which means you owe more than your available credit. To keep your credit score at the upper end of the scale, keep your credit utilization under 30% of your available credit. For example, if your limit is $1,000, strive to keep your balance under $300. However, remember that the ratio applies to your cards’ totality, so add up the limit for each card and then figure out your total debt to determine if you’re in the 30% range.