Proper credit card utilization is key to not only building a healthy credit score but to avoiding debt that become crippling later in life. Your credit is a huge factor in your life when it comes to purchases and can lead to a great amount of difficulty in purchasing a car or home if your credit falls on the lower end of the spectrum.
There are some definite things to know and avoid when using your credit cards to keep your balances in line and to keep your credit score climbing instead of falling like a rock.
Stay Away from Cash Advances
Many credit cards now offer cash advances. These should be used in almost no circumstance unless it is a dire emergency and there are no other possibilities. Do not treat your credit card like a bank account that you can withdraw cash from whenever you need it.
Cash advances can get costly quickly because of the fees associated with them. Most issuers will start charging interest for cash advances as soon as the transaction is made and often times have no grace period before the fees start taking effect.
Keep Your Own Account, Don’t Share
Sharing a credit card account with a spouse can lead to very large problems. If one of the partners has a spending problem, obtains limit increases, or incurs debt, the other partner on the account will also be liable for these things.
Not only that, when problems arise with joint credit cards, it can often lead to strains in the relationship. There are already enough hurdles to jump in a marriage without adding financial stress and burden to the equation. Avoid this where possible.
Do Not Use Charge Cards
Charge cards come with no present spending limit and the balance is due each month on the pre-set payment date. This leads to a litany of problems, the biggest being that it encourages unhealthy, reckless spending.
The second is that if you don’t pay the entire balance at the end of each month, you will incur fees that could get very costly and quickly add up. The last thing you need is to pay more money back than you actually spent.
Lastly, charge cards reflect that your credit utilization is maxed out on your credit report and can lower your overall score. Charge cards are bad, bad news.