Credit cards allow you to have a certain amount of money at your disposal in your credit assigned by the bank; the bank makes you a creditor of this card with an established limit, which must be paid every month including the interest on the loan; if you do not pay all the money on the established date, the bank will penalize you for late-payments and it will affect your credit history since you will have negative points.
Having a credit history with positive points will help you build your excellent credit, otherwise, if they are negative. Credit cards can be a very valuable tool for your life, but you must be careful that not everything is what it seems. When using credit cards, you must be very cautious, since responsibility and judgment are needed to generate good credit, especially be careful not to damage the score with negative accounts.
It is not difficult to maintain good credit by having several cards, you only must pay the bills on time. In addition, you must take into account the interest of each item so that each time you pay a little more than the minimum, and reduce the debt little by little because it won't help you pay the interest when your debt is intact.
If you have read our introduction and want to learn how to use your credit card correctly, you are in the correct article, here we will teach you to step by step how to use your credit card correctly and we will know the best time to apply for a credit card.
1-THE OPERATION OF CREDIT CARDS
Credit cards are loans made by the bank as a result of your credit report, unlike debit cards, which are your own money in a checking account.
Credit cards offer a line of credit; that the bank makes you a creditor by evaluating a series of factors, for example:
-If you have obtained a loan in the past and have been a good payer.
Thus, the bank ensures that it has lent money to a trusted person. It is necessary that every time you apply for a loan, you pay it on time to maintain excellent credit and in the future, you can obtain larger credits such as for a house or a car.
2-PAY YOUR BILL ON TIME
When applying for a credit card or a loan, there is a period in the month in which you must pay a percentage of the debt including interest, which will include the following elements:
- ACCOUNT STATEMENT BALANCE: The amount you have spent in the previous billing cycle.
- CURRENT BALANCE: the total amount you have charged to your credit card (including the current billing cycle)
- MINIMUM PAYMENT: the amount you must pay before the due date to avoid late fees (it is recommended not to pay only the minimum payment, pay a little more since the minimum payment is only the interest keeping the debt intact).
- AVAILABLE CREDIT: your credit limit minus your current balance (as you make purchases with the credit card and do not pay your bills, or pay the minimum fee, your credit on your card will decrease little by little, being a creditor of an immense debt inflated by interest and above all, it will continue to owe the debt, since, paying the minimum, it has only been paying the interest.)
When using a credit card, it must be considered that for each purchase made with that card, interest will be added to the amount of the product; so, the credit card should only be used in emergency situations, such as unexpected medical care, some expense that arose suddenly and if it is life or death; only for situations that are complex to handle. You should avoid making unexpected and impulsive purchases because if the product is worth $ 70.00, you will owe the bank the amount of the product ($ 70.00) + the interest that the bank has.
3-DO NOT STOP PAYING YOUR BILLS IN THE INDICATED TIME
It is not only enough to pay the full amount, but also to pay it in the established time; because all banks charge extra money for late fees and not only that, in addition to paying a late payment, that late payment affects your credit history like a negative account, directly affecting your score.
Keeping all accounts current without delay is the best way to maintain excellent credit with low-interest rates, improving your credit history over time.
It is very important to consider the date of your payments, we advise you to set a reminder alarm on your cell phone to avoid future complications, especially a negative aspect in your credit history.
4-STAY BELOW THE TOTAL CREDIT LIMIT
By getting a $10,000, and making the total expense of said card, makes you seem like a desperate person and especially not trustworthy to receive a credit; Since your credit history will show your every move, it is your financial X-ray.
That is why it is advisable to use your credit card only in emergencies, keeping your credit below 30% of your card limit. For example, if you have $10,000, it is better to use $3,000 (since it is 30% of your total credit, that is the perfect handling of the credit card, because the entities do not see you as a desperate person, on the contrary).
These are the most important points that you must consider when accepting a credit card since the bank NEVER loses, furthermore, if you do not pay the installments on time, they will penalize you with high interest, which is reflected as a negative aspect in your credit history.
WE ARE HERE FOR YOU AT ALL TIMES. DO NOT HESITATE TO CONTACT US. WE ARE SPECIALISTS IN FINANCIAL EDUCATION AND CREDIT REPAIR.