4 Smart Ways to Use Credit Cards

Having credit cards can be a big convenience, but it’s also easy to find yourself buried in debt if you don’t use them wisely. Credit cards make it easy for people to make large purchases or several smaller purchases that they really can’t afford. There are also numerous things that can end up costing you more money in interest and fees if you’re not careful. Knowing how to use your credit cards responsibly will help you avoid running into trouble due to high balances, interest rates and fees.

1. Skip the Cash Advances

Most major credit cards offer customers the ability to withdraw cash at ATMs or fill out convenience checks to take to a bank for fast cash. This easy access to cash comes at a high price though. Cash advances usually have fees and high interest rates. Average fees range from three to four percent, according to Bankrate.com. Bankrate.com It’s also important to remember that you’ll be paying interest on a cash advance starting on the day you withdraw that money. This differs from regular credit purchases, which don’t begin to accrue interest until your next billing cycle.

2. Boost Your Credit Score

Being smart about credit card use can help you improve your credit score. The best ways to accomplish this are by keeping a low balance, paying your balance in full each month and paying your bill on or before the due date. Late payments can lead to fees and an increased interest rate. They can also lower your credit score. Carrying high balances or having balances on several cards also negatively affects your credit score. Every month that you pay your bill on time and pay off all or most of the balance, your credit score will go up.

3. Pay More Than the Minimum

Having a low minimum monthly payment might seem like a relief if you can’t afford to pay off your balance, but it can cost you thousands of dollars in the long run. When you only pay the minimum, the majority of it goes toward paying interest instead of your principal balance. This means that it could take decades to fully pay off your balance. You can avoid this by paying more than the minimum every month. Consumers Union recommends sending in higher payments to help you get rid of your balance faster and avoid paying a lot in interest. Consumers Union

4. Choose Your Card Wisely

If you’re looking for a new card, it pays to be picky. Stay away from cards that charge annual fees or high interest rates. Look for a credit card that offers no interest or low interest deals on balance transfers if you’re trying to pay off another card. If you’re interested in building up frequent flyer miles or getting redeemable points from shopping online or in stores, look for a card that offers the type of rewards you want.

Keeping your credit card situation manageable involves watching balances as well as making sure you don’t have too many cards. If you have a lot of credit cards, consider getting rid of a few. Don’t close too many at once or cards that you’ve had for a long time since this can hurt your credit score. Go through your cards and decide which ones you really don’t use, such as store credit cards.

Laura Wilson writes for financial blogs that feature business suggestions for entrepreneurs including how to use an online service like Kanetix.

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