Learn How to Use a Credit Card Responsibly

2. Pay More Than the Required Minimum

Plan to pay more than the minimum on your credit card whenever possible. A minimum payment is usually preferable to a missed or delinquent bill, but it may result in your account carrying a balance.

 

The statement amount on your credit card bill depicts your credit card activity over the previous billing cycle; your current balance shows all of your account’s current charges.

To prevent accumulating interest, you do not need to pay your entire current debt every month. If you pay your statement balance each month, those charges will not transfer over to the next cycle, and you will not accrue any new interest.

You were making the minimum needed payment can result in costly interest charges, especially if you have a large balance. Even if you cannot pay your entire statement total, always attempt to pay some amount above the minimum—even a tiny amount extra can help chip away at future debt.

Furthermore, paying more than the minimum helps reduce one of essential components of your credit score: the credit usage ratio.

 

Your credit usage ratio compares the amount of credit you have available (both in individual credit card accounts and in total) to the amount presently being used. The lower your ratio, the better, but it should always be less than 30%. To avoid damage to credit ratings, an account with a credit limit of $1,000 should have a total amount of less than $300.

3. Use Your Card for Necessary Purchases to Keep Balances Low

Use your credit card for expenditures you would make even if you didn’t have a line of credit, such as groceries or gas for your car. Avoid using your credit card to buy things you don’t need and can’t afford to pay off right now. Using your credit card for routine purchases can help you create a strong credit history and receive incentives, such as cashback or travel miles if your card offers them.

Furthermore, charging using a credit card is generally safer than charging with a debit card. Charge more considerable expenses, such as rent or medical bills, only if you have high credit limits and know you’ll pay them off monthly. Larger purchases can consume excessive available credit, increasing your utilization ratio and harming your credit scores.

Avoiding Common Credit Card Mistakes

Making credit card account management mistakes might cost you credit score points and penalties. Keep the credit principles listed above in mind to avoid typical blunders, and avoid the following:

Using Your Credit Card to the Limit

Using more than 30% of your available credit can hurt your credit score. Even maxing out one credit card can significantly impact your overall utilization ratio, so you’ll need to pay close attention to your credit score for a time if you do.

First, cease charging on your card and create a budget to avoid excessive expenditure. Make a plan to pay off your debts.