A credit card can be a good tool for a smart financial life, but if you're not careful a credit card can be a quick road to debt that many people spend years trying to pay off. One of the most important parts of managing credit responsibly is to not let your debt get out of hand.
Step 1
Choose cards that work for you. If you know you'll carry a balance from month to month, choose the card with the lowest interest rate to minimize how much extra you'll have to pay. If you plan to pay your card off every month, choose a card with a long grace period for making payments so that you don't get hit with interest if your cash flow hits a snag one month.
Step 2
Use your credit card like cash. If you couldn't pay for a purchase with the cash in your checking account, think twice before charging the purchase on your card.
Step 3
Pay off credit card purchases as quickly as possible. If you make a large purchase, plan how you'll break up the payments before you buy, and set aside the budgeted amount of money for your credit card payment each month.
Step 4
Never pay only the minimum balance due more than one month in a row. Paying the minimum fulfills your obligation to the credit card company, but it increases the total amount you'll be paying over time due to interest.
Step 5
Avoid charges that take you close to your credit limit on any card. According to Kiplinger's magazine, if you routinely charge the maximum on your card, it could reflect negatively on your credit score and decrease your available credit limit in addition to making it harder to get out of debt.
Step 6
Don't collect too many credit cards. You may get lots of credit card offers from stores, banks and organizations, but choose one or two that work with your budget and pass on the rest.
Step 7
Pay your bills on time. Every time you pay a bill late--even if it's just a few days late--you run the risk of late fees, increased interest rates and other charges.
Step 8
Read through your credit card statement every month, checking it against your own records and making a note of any changes in fees and rates from previous statements.
Tips and Warnings
- Be sure you understand all the terms of your credit card agreement before you take on a new card. Sometimes, fees may change after an introductory period or require an annual fee after the first year. Make certain a card works for your short-term and long-term goals before taking on the responsibility of more credit.
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