Pay Attention to Total Monthly Debt Payments - Most experts suggest that your total monthly debt payments like car loans, student loans, credit card payments etc. should not add up to more than one-third of your total income. That is the reason you should pay close attention to the monthly debt values and reduce your use of credit card accordingly. Getting burdened with more debt than you can handle, can endanger your financial stability as well as your long-term goals such as retirement planning
or savings for your child’s
Check your credit reports regularly -Since your credit score and history reflect your ability to borrow, you should keep a regular check on your credit reports. It is also necessary to review it yearly to look for any errors. Credit reports focus on a variety of factors such as whether you pay your bills on time or not, the type of credit you use, and the number of credit inquiries you have initiated. Since many different transactions get involved, it is possible to have errors in any of the above information. Keeping a regular check can help you prevent these errors from lowering your credit score or denying you the availability of attractive interest rates.
Pay on time and avoid closing cards you do not use - You may think that only actions like missing a payment or carrying a large balance can damage your credit score
. However, in reality, there are a variety of other factors involved. One such other aspect of a low credit score is cancelling older cards. According to experts, lenders keep an eye on your credit history and the longer it is, the better. Since closing down a card you do not use often lowers the ratio of available credit to the amount of credit you are currently using, it has the potential to skew your credit ratio and make you appear like an unreliable and risky borrower.
Read the policy agreements -It is essential to know that all credit cards do not get created equal. While some of them charge annual fees, others charge for balance transfers, cash advances, exceeding credit limit etc. Therefore, it gets recommended to read and understand the issuer’s credit card policy agreement and choose one that best suits you. For example, you should choose a card with rates and fee structures that match your expected purchasing or repayment behaviour. Also, looking for when your interest rate might increase, overseas transaction charges, and other actions that carry fees can help you pick out the best credit card as per your needs.
Use cards safely -The use of credit cards is endless, but it is necessary to do it safely. With most industries going digital all across the globe, the risks of credit card frauds and thefts have become higher. Therefore, it has become crucial to get proactive and use cards responsibly. The risks can get reduced significantly by reviewing monthly card statements and checking online accounts more frequently. Experts state that fraud prevention works best if you stay vigilant and keep your receipts to compare them regularly with monthly statements, report a lost or stolen card immediately and take other necessary measures to remain proactive.
Maximise rewards - Choosing cards that offer cash rewards can help you save more. There are various types of credit card rewards such as points towards merchandise, airline miles, access to an airport lounge, free entry to exclusive clubs etc. Maximising your rewards while spending money can be beneficial and help you accomplish a few of your financial goals.
Pay off balances strategically -Even though it is essential to make at least minimum payments on all your debt to keep your credit score
stable, creating a strategy to pay off higher interest rate cards first can help you save money over time.