Credit cards are a great way to build credit and earn rewards. But they can also be harmful if you aren’t careful about your average credit card interest.
Here are some tips to help you get the most out of your credit card:
Pay the statement balance in full
The second way to keep your credit score in good shape is by paying the statement balance in full, on time. Your credit card company will send you a bill once every month.
If you can pay the statement balance all at once, that’s great! If not, make sure to pay more than the minimum payment amount (usually between 2% and 4%). This gives you a better chance of avoiding interest charges and late fees from your credit card issuer.
If you can’t pay the statement balance, pay more than the minimum payment
The minimum payment is the least you can pay to make a balance disappear. But it’s not the same as your interest, which is the money you have to pay on top of what you borrowed.
And it’s not even close to an amount that actually reflects how much you can afford to pay each month. It’s your choice whether or not to make extra payments through your credit card company.
Understand and keep track of your credit limit
The credit limit is the maximum amount of money you can charge on your card. Your available credit is the total amount of money that you have charged and paid off in full, minus any charges that are past due or otherwise unpaid.
Make all payments on time
One of the most important things you can do to make the best use of your credit card is to pay your bill on time.
This is because timely payments will help you build an excellent credit history, which can open up new opportunities for borrowing money in the future—a mortgage or car loan, perhaps.
Use your card wisely to help build credit
The best way to boost your credit score is to use your card wisely. By paying off your balance in full each month, you’ll be doing yourself a favor. This can help you avoid debt and prevent late fees, which are recorded as negative remarks on your credit report.
According to advisors like Lantern by Sofi:
“There are several factors that determine the interest rate of a credit card. This includes the applicant’s credit score and the type of credit card, as well as the current prime rate.”
Read all communications from your credit card issuer
It’s important to read the mail that arrives in your mailbox and not just toss it into the trash because you think it’s another advertisement or bill reminder.
That mail may contain important information about your credit card, like when a payment is due or when an additional fee has been added to your account.
Watch out for fees
There are a variety of fees that may be charged on your credit card, which can make it difficult to know exactly what you’re paying for.
Some fees are charged at the time of the transaction, while others are billed at the end of each billing cycle. Also, some fees might not even show up on your bill until months later—for example, late payments can cost you money in fines and penalties!
The tips you have found here can help make you better prepared when the time comes to make credit card payments or decide whether to apply for a loan.