Most people have a love/hate relationship with credit cards. While handing over that little piece of plastic may feel painless at the time, once the harsh reality of minimum payments and skyrocketing interest rates begin to sink in, all fun and games come to a sliding halt. If you follow 5 simple rules of credit card management, you can maintain your credit rating and increase your FICO score while still reaping all the benefits of having a credit card. Your credit card management style will determine your credit score. Once you have this under control, life will be that much sweeter.
1. Do not apply for or use store credit cards.
With a store card, you are limited to store use only and it can bring your credit score down. Use major credit cards for all your purchases if you would like to work on building or repairing your credit. Just make sure you make your payments on time. These are the credit cards that help maintain your credit score and keep you in good standing.
2. Read ALL the small print and make an effort to understand it.
You can’t rely solely on credit companies to advise you about the dangers and pitfalls that can happen if you don’t properly manage your credit card situation. Find out what the result will be for a missed or late payment, what happens if you cannot make a payment for one month, and what your responsibility is in case of credit card fraud. You need to pay very close attention to how the interest rate works. Also, find out if there is a cause out of your control if they can raise the interest rate without your knowledge. Being prepared ahead of time is key for properly managing your credit card debt.
3. Pay every payment on time.
Do not ever make a late payment. This can be the number one reason they raise your interest rate and make it more difficult to get out of large debt. Watch the cycle date on your card and do not pay it before your next cycle date or after the due date. Always pay online or by phone and get your confirmation number. Accidents happen and a payment that is applied to the wrong account in the same family often will not be changed over and is counted as a double payment on one card and a missed payment on the right card.
4. Do not charge over your credit limit.
Most credit card companies no longer stop charging at the limit. Once you go over the limit, there is an extra fee. Companies can increase your credit limit without your consent. Always be sure to keep track of how much you are spending so that you avoid going over your limit at all costs. The penalties for this are typically not worth the purchase that pushed you over the limit.
5. Do not request an increase unless it is an emergency.
Each time you request an increase in your credit limit or it is increased due to charging over your limit, the companies run a credit check. This is another hit against your credit and can affect your credit score. Be honest with yourself before making that call. If you are not in an immediate emergency, chances are you should not request an increase.
If you follow these simple guidelines, you will be on the right track for credit card success. Just remember, the purchases you make today can haunt your credit score forever if you are not careful. Spend with care and in the end, you will be very happy that you did.