Using credit wisely

Follow these tips to use credit wisely.

Instructions: Click each tip to learn more.

Shop for credit

  • Shop around for credit cards with low interest rates and low or no annual fee.
  • Look closely at credit card offers that use the word “free.”
  • Watch for rate changes after the “Introductory rate.”
  • Usually, everything has a price. Avoid loans and credit cards with high interest rates.
  • Don’t take on monthly loan payments you can’t afford.

 

A pile of credit cards.

Plan your shopping

Don’t use your credit card to buy things you really can’t afford. Let your budget be your guide. Resist impulse buying.

Set limits

  • Don’t exceed your credit card spending limit and try to keep your balance 70% or less of your limit.
  • Avoid having monthly credit card payments that exceed 10% of your monthly net income.
  • Don’t let the total amount you charge to your credit cards exceed 20% of your yearly net income.
  • Maintaining a number of credit accounts over a long period of time can actually improve your credit score — but only if you limit your credit use.

 
A pen resting on top of a credit report.

Keep track

  • Track your credit card charges throughout the month.
  • Save your receipts and check them against your statement.
  • Track the charges made on your credit card online, before you even receive the bill in the mail.

Pay on time

  • Pay on time.
  • Pay off credit card balances monthly if you can.
  • If you can’t pay off your credit card balance in full, pay more to your high-interest accounts every month while paying at least the minimum to lower-interest accounts.
  • At the very least, pay the minimum payment to every account, every month, on time.

Contact your creditors

  • If you can’t pay the minimum due on your credit card, call your creditor and ask for an extension or to set up a payment plan.
  • Try to have you APR lowered, too, which may reduce your payment.
  • If nothing can be done, look for money in your overall spending plan that you can put toward your payment.

Get help early

  • If you’re getting into trouble with debt, get help early. Contact your lender.
  • Try to work out a repayment plan that works for both of you.
  • You may also want to consider talking with a credit counselor, an experienced professional, who can help you develop a plan to get out of debt.

Note: The key to financial freedom is living within your income. That means not borrowing more than you can comfortably afford to repay.

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