Owning a credit card comes with more financial responsibility than most people realize. Many people get daily offers in the mail for different financial accounts. For a lot of people it is fairly easy and simple to get some type of card. It is also simple and easy to acquire a balance on the card. However, it can be much more complicated to learn how to manage your card correctly. Not being careful with such a financial responsibility can affect your credit score, and therefore, your future ability to get additional financing, including auto and home loans, and your employment abilities and opportunities. Managing a charge card is not to be taken lightly. Adhere to these best practices with your account in order to maintain and even improve your financial profile.
Stick to Major Companies
There are many different types of charge accounts available; from department store brands to American Express and Diner’s club. However, most stores accept a major carrier such as Visa or MasterCard. This means there is no need to have several different credit accounts with different companies. Sticking to a Visa or a MasterCard will cover your financial needs well.
A Transaction Tool
A charge account should be considered a transaction tool; a way of paying for something just like cash, a debit card, or a check. It should never be considered to be a source of money. One way or another, and sooner or later, you will be paying back the money you used to accumulate a balance on the account.
Use a Reward Program
Many banks are offering incentive programs for credit cards. Choosing a card with a reward or loyalty company is very beneficial. These programs are good for various items, airline tickets, and even cash back. Instead of paying with cash, use your charge account to pay for purchases and services and you can earn points for items or cash back. This is like paying yourself for using your money.
Pay Your Balance
Each month it is very important to pay off the balance on your account. Carrying an unpaid balance from month to month causes you to incur more charges through interest. Even if you cannot pay off the entire balance each month, paying as much as you can will decrease the amount you will pay over time in interest.
This advice is two-fold. If possible, stay away from companies who charge membership fees or other routine fees just for having an account with them. There is a lot of competition for your business among banks and if you have decent credit you should be able to find a card without these types of fees. Secondly, pay your balance on time and avoid going over your account’s limit. Paying late or going over the limit will quickly add extra fees, approximately $30-$40 each time, to your account.
Link Accounts When Possible
If you can, use the same bank for a checking or savings account. With online banking, this can make payments quick and easy. This will help avoid late payments and decrease additional fees.
Each month check your statement and make sure all of the transactions are valid. If there is anything suspicious in your statement, report it immediately to your servicer. If you have access to your account online, check it on a weekly basis. Most companies have a zero liability policy for any fraud that has occurred on your account. Often when you have been a victim of credit card fraud it can be easier than having your checking account fall victim to fraud, where you will have to deal with chexsystems. You will also want to be sure that you do not use public computers and only use secure internet connections in order to perform any online banking transactions.
Carry Two Similar Cards
Many financial experts recommend having two charge accounts of similar value, interest rate, and rewards. This can be beneficial in numerous ways, such as doing a balance transfer if you accidentally miss a payment on one and the interest rate increases. Or if for some reason you do not carry cash and one card is declined for a purchase, having two cards can make life more convenient, and in some circumstances help you to avoid embarrassment.
From choosing a cards, to how you use it, and everywhere in between, there are small steps you can take to be financially responsible with them. Following these best practice tips will increase your credit score and make your charge card work for you. With some self discipline and dedication, your charge card can be a useful financial tool.