How to End Bad Habits with Credit Cards

Having a credit card is a huge responsibility, and careless use could end up haunting you for years with poor credit scores, a mound of debt, paying only the interest.  It is no wonder why you can start opening a credit card at age eighteen, trying to get you with debt early on.  If you find yourself with bad credit card habits, now is the time to make a few changes.

Stop Spending

While it may seem like common sense to stop spending, but actually this usually is the most difficult to overcome to get on the right track with credit cards.  It almost seems like play money because there is no cash exchanged during a transaction, it is put on the card, so it is easier to be careless with money being out of sight and mind, that is, until the statement comes in the mail in a few weeks.  Stick to your household budget to only spend allotted funds will help curb, but maybe it is time to cut up the card and use cash for a while until you are back on track.

Pay More than the Minimum

Credit cards seem like they are great; on the surface, you can charge what you want, pay off down the road, and make little payments until the balance is paid off.  That method can actually hurt your credit and cost you in interest payments.  By making the minimum payment, you are essentially putting little, if any, towards principal, so every month you make the minimum payment it will go towards interest first and you will likely see your outstanding balance hardly disappear, or take years to make a dent.  In order to get rid of credit card debt, you will need to make large payments until the balance is gone, and then after, make sure you can pay off the balance each month without carryover.

Pay Attention to Rewards

There could be plenty of money going unclaimed by missing out on taking advantage of rewards on your credit card.  Some cards use airline miles, some rewards points that can be redeemed as gift cards, while others give you a check once a year with the total cashback.  While you should always look for the best rewards that fit your need, taking advantage of any rewards should start now simply by making purchases you would normally make with your debit card, but now it is a credit card.

Understand Your Credit Report

Careless use of your credit account not only will cost you in interest, but if will have a large effect on your credit report.  Late payments made over thirty days after the due date will drop your score and take years to come off.  Scores are also impacted by the outstanding balance against the total available credit, so the smaller that window, the lower your score will drop.  Also, even if you have paid down a balance to zero, closing the account could also lower your score, as that will reduce the credit availability as well.