A credit card could be the first step in building a solid foundation for your further financial life. It might be the beginning of a strong financial profile, but at the same time, irresponsibility could turn this venture into a financial disaster. Here are a few helpful tips to implement in your financial behaviour to ensure you use your credit card by the book.
Pay more than what you are asked to
The rule is fairly simple to understand – the faster you pay your debt off, the better. No one wants debt – it is stressful and it can cause various complications. No matter how much you spend with your credit card, you will be asked for minimum monthly repayments, which could be tiny or slightly high. If you are asked for £5 a month, try paying £10 or more. The faster you fix your balance, the less interest you will have to deal with later on.
Apart from saving money on the interest rate, you can also get rid of that thing that is constantly on your mind. As a general rule of thumb, try to pay off as much as you can and you will thank yourself later.
Slow down on those applications
Applications for credit cards go in an unusual direction. The more you apply, the more chances you have, right? While this rule may apply to other things, it does not work for credit cards. If you apply and you get rejected, it might have an impact on your financial history and credit score. Apply for a second company and get rejected again. The more you do it, the more likely you are to face rejection.
Previous rejected applications in a short period of time will raise some question marks for lenders. Fortunately, some companies bring in eligibility checkers – use such tools. It pays off knowing upfront whether you might be accepted or rejected based on your current financial situation, requirements and circumstances.
Boost your credit rating with a credit card
Having lots of credit might affect your credit rating the wrong way. But having no history whatsoever is just as harmful. A good credit score will give you better deals and easier access to more important stuff, such as a mortgage.
Use your credit card – even if you actually have the funds for your purchases, then pay everything back before the interest kicks in. it shows responsibility and it boosts your rating.
Pay your balance in full every month
If you can do it, try to pay your balance in full before the end of the month. This is probably the best way to use your credit card. At this level of responsibility, you do not even have to think about interest rates. Instead, focus on cash back rewards and other special offers.
Furthermore, some lenders provide even more offers for those who repay their debt within the interest free time – it is usually a month.
Get a direct debit up
Are you the type who forgets about bills or payments? Some lenders will not notify you on upcoming payments. Delaying by one day can bring in extra fees for late payments, even if it was an innocent mistake. To avoid such mistakes, simply set a direct debit and ensure the bank can take the money on the right day.
In the end, credit cards could become your best financial friends for support and a great score, but they can also overwhelm you. Just like any other financial product, they require thorough planning and attention upfront – as well as a great degree of responsibility.