4 Tips to Using Credit Cards Wisely

Figuring out how to manage a credit card might be the best step to take, wherever you are on your financial journey. For some steps to using credit cards wisely, start by asking yourself the following:

• Is using a credit card the right way to pay for the purchase? Would cash or a debit carddebit card work just as well?
• Is it clear how interest is charged?
• Will any credit card fees be assessed?
• Once the charge is made on the card, is it easy to track the minimum payments and due dates?

It can be helpful to run through these questions for each card.  Knowing due dates, minimum payments and other terms is very helpful to using credit cards wisely.

Credit cards are available with many options. Compare different cards based on your needsyour needs and the card terms. For those interested in using credit cards wisely, it is helpful to look at the following:

• The annual percentage rate (APR): This is how much interest you will pay if you do not pay off your balance each month. Also, for many credit cards, rates may increase after a short period of time.
• Fees: Many cards have yearly fees. Most charge for late payments, balance transfers, cash advances, or spending over your credit limit.
• Credit limits: Your credit limit is right for you when it is in line with what you can afford to pay back. Many people we work with find that high credit limits offer challenges when it comes to managing the balance owed.

• Managing just a few credit cards can be easier than having many cards.
• When you reach the spending limit on one card, it’s best to manage those payments before shifting your purchases to another card.
•  Planning monthly expenses and setting a budget is the best way to easily adjust your spending habits.

• Keeping your receipts helps with keeping track of monthly activity.
• Having a plan will help you reduce the chance of impulse buying. When you have a plan, there’s less chance you will overspend on items you don’t truly need.

Sometimes it is necessary to use credit cards to cover important expenses such as food, gasoline, and utilities. If that becomes a regular pattern, it is helpful to review your budget.

When looking to use credit wisely, it is helpful to take a close look at your credit card usage if:

• You are only able to make minimum payments on your credit card debt and other accounts.
• You have recently been denied credit.
• It’s challenging to set aside savings. If it is challenging to set aside savings on a consistent basis, there is an opportunity for you to review your monthly budget based on expenses and available income.
• Cards are near or over your credit limit. Your creditors set your limit based on your credit history, income and outstanding debt. If you are at or near this limit, it’s a good time to take a good look at your financial health picture. You can focus on making future purchase decisions as part of using credit cards wisely.  A good rule of thumb is to try to keep your balances below 50% of your available credit limits.
• You are taking cash advances from cards to pay your other bills.
• Collectors are calling. Receiving calls from creditors happens to many people.  And many people are able to relieve this financial stress by figuring out a budget with a financial counselor and reviewing your options.