5 Tips For Using A Credit Card And Building Credit
It’s no secret that credit cards can be a dangerous financial tool for the unprepared. But in the right hands, a credit card can be an incredibly useful tool for building your credit history, managing your spending, and saving money on interest. The key is knowing how to use these tools responsibly so they can work to your advantage instead of against you.
How to get a credit card for the first time? SoFi experts say, “Getting a card for the first time comes with a lot of unique challenges.”
Here are the top five tips for using a credit card and building good credit:
Check Your Credit Score Regularly
While you should never go into debt, it is important to understand your credit score. It’s a number that indicates your creditworthiness and can affect your ability to get a loan or a credit card.
The three major credit bureaus—Equifax, Experian and TransUnion—are responsible for calculating this number. Your score is based on several factors, including:
- Your payment history.
- How much debt do you have (credit utilization ratio)?
Use Your Card For Small Purchases Only
Your credit card is a tool to help you build your credit score, but it’s a tool that can be misused if you need to be careful. In fact, most Americans have at least one credit card and use it regularly—but most people don’t know how to use it properly.
Using your card for small purchases only will help ensure that you stay in debt with your new credit line and that your payments are on time each month. This will also keep your interest rates lower than they would be if you were using the card for larger purchases or making late payments.
Pay In Full Every Month
Paying in full monthly is the most important thing you can do to build credit.
- Why? Because paying your balance in full shows that you’re able to make payments on time and responsibly. When lenders see this, it tells them that you’re likely to be able to make the payments on future loans or credit cards.
- How does this benefit me? By using a card responsibly, a good credit score is built over time and can mean lower interest rates on loans like mortgages or car loans, as well as opening up certain financial opportunities like getting an apartment lease with a security deposit waiver.
Set Up Automatic Payments To Avoid Late Fees
Setting up automatic payments is the easiest way to avoid late fees and ensure that you get all the payments. It’s also super easy to do—you can set up automatic payments online or over the phone. If you don’t want to pay a late fee, make sure that you set up automatic payments!
Find A Card That’s Right For You- And Stick To It
Find a card that’s right for you–and stick to it. Choosing the right credit card is an important first step, but the real work starts when you get your first card in the mail. You don’t want to switch cards every six months or so and rack up lots of fees (and hurt your credit score). Once you’ve found a card that feels like home, stick with it!
Hopefully, they’ve helped you understand credit cards better. They can be useful tools for building credit and managing your spending, but they also come with many risks. So always check your statements and pay attention to what’s happening, so you don’t get caught off guard by fees or interest charges!