California is known for its consumer protection laws, including its ongoing attempt to enforce a law banning merchants from adding a surcharge to credit card purchases. To get the most out of your credit cards, including any perks or rewards you’re eligible for, you need to master the art of responsible credit card use. In this article, we offer 8 tips to help you stay out of debt, keep your credit score up, and protect your personal and financial information.
1. Pay Off Your Balance Every Month
Paying off your balance every month keeps your credit utilization rate low, which is good for your credit score. It also prevents you from racking up additional interest charges, making it hard to get out of debt once you start carrying a revolving balance.
To pay off your balance every month, make sure you don’t charge more than you know you can afford to repay. If you find yourself in a situation where you can’t pay off your balance each month, try to pay more than the minimum due each month. This will reduce the interest charged and make it easier to pay off your balance faster.
2. Make Payments on Time
Making on-time payments each month will also contribute to a healthy credit score, as your payment record is an important indication of your creditworthiness. This is true even if you carry a revolving balance. Payment history is one of the main factors that go into calculating your credit score.
In addition to missed payments harming your credit score, late payments also incur fees and possibly even interest rate hikes if you consistently miss payments or make payments late. To avoid this, take advantage of scheduling automatic payments, so you don’t have to remember to submit payments each month. You can set up auto payments for the statement balance, minimum payment, or another amount.
A cost-savings benefit of the SkyOne Classic credit card is if you make three minimum balance payments or more by the required due date within a consecutive period (a three month timeframe) and you make a total of $300 in Point of Sale (POS) purchases within the consecutive period, your APR will reduce by .25%. These 0.25% APR reductions will continue to occur if you meet all payment and purchase requirements until you reach the maximum achievable 7.00% APR (Annual Percentage Rate). You can try, but you probably won’t find another credit card that does that. Click here for details, full disclosures, and to apply for the Classic credit card.
3. Check Your Statement Regularly
Whether you receive your credit card statements in the mail or opt-in for digital delivery, you should take time each month to review your statements. In addition to checking for erroneous or fraudulent charges, reviewing your credit card statements can also help with budgeting and getting clear about where your money goes.
4. Use Credit Cards for Necessary Purchases Only
Especially when you’re new to having a credit card, set guidelines for how you’ll use the card. One option is you could only use it for one or two charges each month to establish a good credit history. You may also set an “emergency use only” policy, but a better option is to have an “emergency” savings account of at least 3-months of expenses. Or you can take advantage of cash back or other rewards to pay for necessary expenses such as utility bills, cell phone bills, filling up your tank, Internet and cable, groceries, and more. If you do this, consider transferring the funds to a savings account when bills are paid on the card to make sure you can pay off the card each month.
The bottom line is that sticking to caution and specific parameters for your credit card usage will help you stay out of debt and ensure that you have available funds in the event of an emergency or unexpected expenses.
5. Take Advantage of Rewards and Extra Perks
If you have a rewards credit card that gets you points, make sure to use them and not let them go to waste! Many rewards credit cards offer cashback to use as a statement credit or provide cashback in the form of gift cards to specific retailers, discounts on travel expenses, and more. With a rewards credit card, you may also qualify for discounts or extra perks when shopping at certain retailers, saving you money on things you were going to buy anyway. Some people also keep their cash back or rewards points all year to use during the holiday season. Make sure to thoroughly review what kind of rewards benefits you’re eligible for with your card, so you don’t miss out on any perks.
6. Don’t Close Unused Accounts
If you have an older credit card or one with a paid-off balance that you no longer use regularly, you should still keep the account open with a $0 balance. Closing unused accounts will negatively affect your credit score, and you’ll likely see a significant drop in your credit score. This is because closing an account lowers your overall available credit and will increase your overall credit utilization, which you also want to keep as low as possible. Closing out unused accounts also negatively affects your length of credit history, which can also cause your credit score to drop, as a more extended credit history contributes to a better credit score.
7. Don’t Apply for Too Many Credit Cards at Once
Applying for multiple credit cards at once or within a short period can seem like a red flag to lenders. It could be a signal of financial distress, especially if you carry revolving balances. This harms your credit score. Every time you apply to open a new credit card (and other types of loans), the lender runs a hard inquiry on your credit report. Each hard inquiry can knock your overall credit score down a few notches for up to a year. Plus, if you apply for more than one loan or credit card within a short period, each new application could derail the previous one. That’s why you should only apply for one credit card at a time and double-check the qualifying requirements beforehand to make sure you meet all the guidelines.
Once you have a credit card or two, you’ll likely start receiving physical mail and email offers to state that you’re pre-qualified for other credit card offers or promotions. However, this does not mean you need to open a new card just because you receive an offer for one. You should only open a credit card if and when it’s necessary. Think of it as a long-term commitment, and choose your card(s) carefully. Don’t sign up for every retail credit card offered by physical and online stores, either.
8. Keep Your Credit Cards Secure
Responsibly using credit cards also means safeguarding your credit card(s) and sensitive personal information. This applies to physical cards and documents as well as online account access. This means making sure your physical credit cards are kept in a safe place when not in use. Keep the credit card(s) you regularly use in your wallet. Cards you use less frequently or not at all should be kept in a secure location in your home. Ensure they’re out of reach and out of sight from anyone you wouldn’t want to have your card number, including your children. Never leave credit cards in your car, on your desk at work, or any other visible place in the physical or digital world.
It’s also a good idea not to save your card information with online retailers or anyone else. The more people or companies who have your payment information saved, the more chances your credit card information could be stolen.
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SkyOne Federal Credit Union has been serving members like you for over 70 years. We provide financial tools to help you save for the future, get financing for your home and car, and make everyday purchases. Compare SkyOne’s Visa Credit Card options and apply online today! We also offer credit and debit card management tools to help you keep your finances organized. Not a member yet? Join online today!