Credit cards are can be our biggest stress-booster, in terms of maintaining our finances.
Achieving financial stability, in our early adult life, requires real dedication as well as a positive mindset.
I love shopping; henceforth, the idea of limiting my spending to improve my credit score makes me sad every day.
In my recent quest to understand more about paying off debt while maintaining a steady-state of savings as well as spending, I came across the concept of –why not using a credit card at all can be a negative factor on our profile.
Credit card companies love you
Any lending company will be genuinely in love with you more than how much you want your life partner to do the same!
To maintain a healthy relationship with your credit cards, it is not good to NOT use the cards at all. I made that mistake.
Because I had a significant amount of debt, I consolidated everything in one card and let the others sit with zero balance. I avoided using them out of fear.
However, a couple of weeks back, one of my unused card reduced its limit from $1500 to $300. And I realized how we need to maintain a regular usage of the cards.
Use and pay-off the balance right away
We can organize our expenses and allocate the amount we may want to spend per month or week. Although, sometimes unprecedented events can occur.
Thus, use the credit cards for an amount that you can pay-off ultimately within the statement period. By doing so, you will avoid adding interest, if any, on your balance.
Moreover, consistently using the credit cards and making payments on time will help improve your credit score as well as with time, you will find an increase in your credit limit.
When you use a credit card significantly, sometimes the companies do increase the credit limit, which is always a perk, as far as we do not misuse it.
Remain within 30% of the credit limit
To have a comfortable spending flow, it is a good practice to distribute the expenses in multiple cards. By doing so, we avoid putting a burden on one card as well as we can maintain the 30% rule.
If you read any of the credit reports, you will observe that they recommend us to keep the overall spent – balance as well as in each of our loan accounts to be at most 30% of the available balance.
When we maintain the usage of individual cards automatically, we will see a standardized effect on the credit report.
Often we get lured by the offers we receive from the credit card companies, and with 0% interest plus a $0 fee, we many times end up exhausting the limits.
The sole existence of credit cards is to help us not to debit the amounts directly from our bank accounts. They are providing us the comfort of paying them off with time.
When we have a family, or expenses beyond our control, playing with money can be hard.
Hence, the trick to overcoming debt fears will be to use the option but not abuse it.