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Thursday, July 14, 2011

Using Credit Cards: Pros and Cons

I have talked about budgeting and how you should have a budget and stick to it so that you can save more money over time. I have mentioned that some people do this by not using credit cards at all.

I happen to think that credit cards are fine to use, if you do it properly. They are a great way to help raise your credit score. You just have to follow a few simple guidelines:

-Try to never have more than 30% of your credit limit used. If your limit is $1000, never have more than $300 spent.
-Paying the card off every month is a great way to avoid interest charges, but paying off a large amount one month(say $200 of the $300) then paying the other $100 off the following month shows credit card companies that you can pay off charges as well as make payments. Plus the interest would be minimal under $5.
-This one seems simple enough-pay the card on time. If need be set up an auto-payment every month or have them send a reminder email.
-Also if you use your credit card regularly-make sure you have one that rewards you with cash or points.
-If you never use your credit card try having one of your monthly bills get charged to it, like your cell phone. This way you know you can pay it every month and you will be working towards a better credit score.

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