3 Important Things You Need To Do To Use Your Credit Card Wisely

December 17, 2018 Stu Q

This is by far one the most busy times of the year in shopping. Between the shopping for gifts, buying groceries for food, and going out to dinner – your wallet takes a hit. Is it coming out of your bank account right away, same as cash? Probably not! You are swiping the lovely credit card which allows you to spend more money than you own. Magically enough, there are some easy tricks and tips you can use to NOT go crazy in debt!

1) Know Your Credit Limit And Multiply By 30%

This is a simple way to keep you focused. A good rule of thumb when using a credit line is to only utilize 30% of the line (i.e. potentially having it roll over every month). This will look good on how your FICO score is calculated next time it is checked. Thus, if you have a $10,000 limit on a line, you should not utilize more than $3,000. Setting this value as your new credit limit will also help you to avoid spending too much money that you may not have to directly pay it off right away.

3) Have A Plan In Place BEFORE You Swipe

One of the biggest hurdles we have worked with others on is the lack of planning when using credit cards. It is an amazing thing to have a credit card, but it is NOT free money. Thus, you have to make sure you have a plan as to how your are going to pay it off. For example, Jordan and I are using our credit cards to buy Christmas right now. We had already budgeted a set dollar amount for gifts, and we are using our travel rewards Visa to buy the items for the rewards. At the end of the month, although our credit card bill will be much larger, we already have the cash ear-marked to pay off the card. It is really that simple!

3) Get Rid Of The Random Cards You Don’t Need Or Use

This is a huge one. I have seen countless starting debt payoff sheets. Most of them have 7-15 credit cards on them! Why? Again, a good rule of thumb is to try not to exceed 3-5 lines open as a given time. Having all of those lines open is hurting your credit. Pick the 3-5 you need, or provide the best benefit and close the rest. Yes, you should be able to close the card even if there is a balance on it. You will still be billed for the remaining balance as you were, but this way you wont have to have this extra line open.

Listen, I know so many other financial coaches and gurus are going to tell you to stay away from credit cards. This is great advice is you are in a really bad spot. However, credit cards have become a part of life and a great tool to be used. If you are in a better spot financially, credit cards can definitely be used to gain rewards and be a beneficial part of your financial management arsenal.