Make Your Credit Card Work For You: Here Are The Top Three Tips
Contrary to popular belief, Credit cards are great tools to help you build good credit. But that is possible only if we put them to use responsibly and not misuse them. You can benefit from having a good credit score and saving money in the long run if you use your credit card responsibly.
According to statistics released by Transunion, in 2021, credit card users in America reached a total of 196 million. Among those users, 20.1 million were new accounts, indicating more than 60% annual growth from the previous year. What is also noteworthy is that the total U.S. credit card balances reached $925 billion in the third quarter of 2022, as per the Federal Reserve Bank of New York. But can credit cards be used for your benefit? This blog post will look at using credit cards wisely and making them work for you.
1. Using Credit Cards to Build Credit
Building a credit score is an integral part of financial health, and one of the best ways to do that is to use a credit card. When you use a credit card responsibly, you indicate to the lenders that you are a responsible borrower. The better you manage your credit card debt, the better your credit score will be.
Suppose you are looking to build a good credit score. A credit card is one of the best tools you can use. Your credit score is determined by several factors, such as your payment history and how much credit you’re using.
To ensure you are building credit responsibly, you’ll always want to pay your credit card bill on time. Keep your credit utilization ratio as low as possible, and don’t borrow more than you can afford.
2. Make The Most Of Offers and Rewards
Almost all credit cards come with promotional offers and reward programs that, when used properly, can save you a couple of dollars. These benefits and rewards can take the form of gift vouchers, complimentary airport lounge access, and other benefits. If your card doesn’t offer rewards, apply for a platinum credit card and get the best offers. Maximize the benefits of your card by utilizing it regularly to accumulate reward points that can be redeemed for cash or prizes in the future. It’s not worth incurring years of debt for the sake of earning a free plane ticket through the redemption of your points. To take advantage of the rewards, ensure that you either fully pay your outstanding balance or choose a low-interest credit card if paying in full is not possible.
Before signing up for these offers, please read the fine print and understand the details before signing up for them.
3. Make a Budget
Making a budget is an essential step in responsibly using a credit card. A budget will help you decide where you stand and how much you can afford to stretch yourself financially. Make a list of all your expenses, including money spent on groceries, food, entertainment, and other necessities, before you use the car.
The average American household spends more than $4,445 on groceries each year, figures based on the Bureau of Labor Statistics expenditure survey say. After You’ve created a budget, you can choose which expenses to charge to the card. For example, you could charge it to the card if it’s a big ticket purchase like a TV. However, if you are buying regular groceries, then it’s best to use cash or a debit card. It will help with keeping up a manageable balance on your card.
Take Away
Owning and using a credit card can be a great way to manage your finances and make purchases more convenient. By using your credit card to maintain a good credit score, working out a monthly budget and sticking to it, and making the most of the loyalty programs, you can enjoy the benefits of using your credit card and avoiding the pitfalls.
