In order to make purchases and various other key decisions, our modern society is more dependent on using credit. Nowadays, good credit is used for more than just getting a credit card. An increasing number of businesses are stressing on having good credit before they extend products and services to you.

This article will let you know why you need to have good credit in the first place.

• 8 Reasons Why Having Good Credit Is Important
• What are 5 Advantages to Having Credit?
• Why is it Important to Have Good Credit?
• How can I Take Advantage of Good Credit?
• What are 3 Advantages of Using Credit?
• What is the Importance of Credit to You as a Student?
• What are 4 Important Rules About Using a Credit Card?
• What are 3 Pros and cons of Having a Credit Card?
• How can Credit Make your Life Easier?
• Why is it Important to Start Building Good Credit Now?
• What are the 9 Rules for Using a Credit Card?

8 Reasons Why Having Good Credit Is Important

1. Helps You In Getting A Job

Getting a job is also a key element as far as good and bad credit is concerned. Your credit will also decide whether you should be given the job or not. If an employer is looking for a candidate who can independently manage their company’s money or manage money for their company’s clients, they will check whether you are capable enough to handle your own wealth.

Read Also: Print on Demand

The correlation that the company is trying to make is that if you are not able to handle your own funds, how you will be able to manage the company’s millions of dollars? Most of these jobs may comprise of company leaders, investment bankers, accountants, and company treasurers. Some companies even look at your credit score before giving you an increment.

2. Helps You Own A Credit Card

Having good credit will facilitate you to enjoy a wide range of benefits credit cards have to offer. If you use your credit card smartly, it will assist you in spreading out the cost of big-ticket purchases along with easily managing monthly expenditures. Not to mention, you will be using your credit card for online shopping, making hotel bookings, and more.

Moreover, you are offered various rewards on spending from the card companies such as cash back points and you can redeem for airline miles, gift cards, and hotel stays, etc. Credit cards also offer protection to your cash and bank accounts from any loss or theft.

3. It Makes You Look Responsible And Trustworthy

If you are having good credit, people will see you as trustworthy and someone who makes his payments on time. And the best part is that the lenders love such people. Good credit helps you in getting quick approval for the loan and even securing a better rate as well.

Various companies make a credit check along with background checks as well if you are dealing with money or any other sensitive information within the company. The key reason behind all this is that the company wants to make sure you are financially sound.

A credit score is also checked by the insurance companies as well. If you are having a respectable credit score, you can get better rates on the premiums. Additionally, whenever you fill a rental application, your credit also gets cross-checked.

4. It Helps You Buy Your Favorite Car

This is one of the common purchases and most people take out loans whenever they buy a new vehicle. Car loans are not as huge as house loans, so you can have it even with bad credit. However, if you have bad credit, you will be qualifying for both a large down payment and high-interest rates on your favorite car. This will mean you will have to pay more as compared to someone with good credit.

When you have purchased your new car, the first thing you need is an auto insurance policy. Almost every insurance company requires your credit score while calculating your premium payments, so having a good credit will save your money here as well.

5. It Helps You Buy Your Dream House

Purchasing a dream home is one of the key investments you make. Without a doubt, buying with a good credit score will make things easier for you. The recession was responsible for foreclosures and many short sales.

Even though the real estate market has recovered, banks are still not confident about lending and they are using more stringent requirements in order to qualify for a loan. Even if you are renting a home, it does require a credit check. If you show delinquent credit, it will be difficult to rent an apartment or a house or you may have to deposit some extra amount.

6. It Helps You Obtain A Personal Loan

A personal loan can be used for a wide variety of things. You can use this loan to pay off your credit card balances or you can also go on a vacation with your family. Whatever is your need, a personal loan will surely come handy. But, whether you will get a personal loan or not will depend on whether you have good or bad credit.

The bank is interested in knowing whether you are able to pay off the loan. Besides a high-interest rate, you may be asked to put up collateral or ask someone (with good credit) to cosign a loan for you. If you have bad credit, then you should avoid having a personal loan. It has been found that the personal loan fee is going to cost you much more than whatever it is you need the loan for.

7. Helps In Getting A Bank Account

If you are having bad credit, it will surely affect you in varied ways. Even if you are making an attempt to repair your credit and improve your money management skills, you will still have to face issues. One of the issues is getting a checking account. A bank has the main authority to give you a loan. No matter what happens a bank will never allow someone with poor credit to bank with them.

From the bank’s point of view, if you are having bad credit, then they will consider you as someone who will overdraft their account, write bad checks, and will create various other money management issues that can cost the bank both time & money.

8. It Can Help You Have Better Rates

A credit score is an important component to getting better interest rates on loans. Some lenders take other factors into consideration including – education, debt-to-income ratio, and employment, but still, some lenders like to stick to the credit score only.

What are 5 Advantages to Having Credit?

Because your credit is a key piece of your financial identity, it’s crucial to build good credit early on. While a poor score can make your biggest financial purchases more expensive, a good credit score can give you a competitive edge during lending decisions.

1. Lower Interest Rates

One of the main benefits of good credit is lower interest rates on your loans. When you apply for a loan, like a mortgage or credit card, a lender or provider typically uses your credit score to determine your interest rate. The lowest rates are reserved for applicants with the highest scores; applicants with lower credit scores typically receive higher interest rates.

To put this into perspective, the average estimated interest rates for personal loans based on VantageScore risk tiers, according to Experian, are in the table below. Please note that lenders determine and set an individual’s interest rate on a particular loan.

2. Improved Likelihood of Qualifying for a Loan or Credit

If you’ve been denied a loan or credit card, you know how painful it is. It can be a hardship if you were denied financing for something you need, like a mortgage or a car. And it can be devastating if you’re not approved for other loans, such as private student loans that help many people afford college.

But with a better credit score comes better approval odds. Of course, your credit score isn’t the only factor that lenders consider, but it is an important one.

3. Approval for Certain Jobs

Some jobs, such as those that work with money or in security clearance positions, require a personal credit check. This is to make sure that you’re capable of handling finances, or that you’re not vulnerable to bribery because of financial problems. If you have a poor credit score, you may not qualify for certain positions.

4. Larger Credit Card and Loan Limits

If you have a good credit score, you’ll be eligible for larger loans, such as the jumbo loans needed to take out a mortgage in some high-cost-of-living areas. You may also qualify for higher credit card limits, too.

For example, according to a recent Experian study, the average Baby Boomer had a credit score of 731 and a credit card limit of nearly $40,000. But for younger Millennials, the average person had a lower credit score of 668 and a smaller credit limit of around $20,000. It’s worth noting that Baby Boomers have had more time to build up good credit since the length of credit history contributes to your overall score.

5. Better Credit Card Rewards

In addition to a higher credit limit, a better credit score also unlocks a wider variety of credit cards. Many of the best rewards cards require excellent credit for approval. This includes travel rewards cards that you can use to fully fund your vacations, and cash-back rewards cards that earn a percentage back on your spending.

Why is it Important to Have Good Credit?

There are many benefits to having good credit. Landlords are more likely to rent you an apartment, for example. If you’re job-hunting, your employer may review your credit as part of the hiring process. But the biggest benefits of good credit are financial. Here are three ways in which good credit can make your life easier and more affordable.

Easier credit approval

If you have good credit, banks and lenders are more likely to approve your credit applications. This means when you apply for credit cards, loans or mortgages, you’ll be more likely to be accepted and may spend less time waiting to hear the results of your application.

Lower interest rates

In addition to having higher credit approval rates, people with good credit are often offered lower interest rates. Paying less interest on your debt can save you a lot of money over time, which is why building your credit score is one of the smartest financial moves you can make.

Better loan terms

People with good credit are often given better loan terms than people with poor credit. You might receive a higher credit limit on a credit card, for example, or you might be able to take advantage of a low fixed-rate mortgage.

How can I Take Advantage of Good Credit?

When you manage your credit wisely, you can earn rewards and save on interest—all while continuing to bump up your credit score even more. Here are six ways to maximize the advantages of good credit.

1. Take advantage of credit cards that offer rewards.

One of the biggest advantages of good credit is that it enables you to qualify for better credit cards—including ones that offer rewards as an incentive for spending with your card.

These rewards are typically paid out as a percentage of your credit card spending and can include anything from frequent flyer miles to travel vouchers to cash back applied to your balance. Over time, these rewards can help offset the cost of future purchases and put a little extra money in your pocket. 

2. Request periodic limit increases to strengthen your credit score.

Good credit can beget more good credit, especially when asking for a limit increase. If you’ve been paying your credit card bill on time and have a low credit utilization ratio, you might be eligible for a credit limit increase.

A credit limit increase can boost your credit score in a couple of ways. First, the extra available credit will lower your overall debt utilization ratio. At the same time, the increased limit will be a good sign on your credit report that you’re being a responsible borrower.

When seeking a credit limit increase, it’s important to know how the credit card company researches your credit background to determine whether you’re eligible. Many companies use a “soft inquiry” that doesn’t show up as an inquiry on your credit report, but some may perform a “hard inquiry,” which can potentially lower your credit score. There’s no consequence for soft inquiries, but you’ll want to keep hard inquiries to a minimum.

3. Ask for a lower interest rate.

Believe it or not, some credit card companies are willing to offer a lower APR to account holders who have a strong track record with the company. 

If you’re in a situation where you expect to be carrying a balance over the next few months, it’s worth asking if the company will lower your APR. Use your strong credit score to your advantage.

4. Use balance transfers and promotional APRs to reduce your interest paid on revolving credit.

If you’re carrying a balance on one or more credit cards, a balance transfer or promotional APR can be a helpful way to use your good credit to avoid paying interest. 

Balance transfers often come with a nominal percentage fee, but the savings far outweigh the cost. Meanwhile, you can use your credit background to get your credit debt and spending back under control.

5. Refinance or consolidate loans to secure better rates.

If you’re carrying debt from years ago when your credit score wasn’t as strong, you might be able to save money by refinancing or consolidating loans. 

Whether it’s a home mortgage, student loan debt, a car loan, or another type of interest-bearing debt, it might be worth contacting lenders to see if you qualify for a lower interest rate that can save you money in the long run.

6. Always pay off balances in full.

One of the best ways to protect your good credit is by paying off your credit card balance in full every month. 

You’ll continue to build up a strong track record on your credit report, and these consistent payments can earn you access to special promotions from your credit card company, including balance transfers, exclusive loan products, and credit cards that offer even better rewards than the ones you’re currently using. Plus, full payments allow you to avoid paying interest and keep your credit profile in picture-perfect shape for the future.

A good credit score is something any consumer can be proud of. Use your credit score to save on interest, improve your spending habits, earn rewards, and build an even stronger credit score over time.

What are 3 Advantages of Using Credit?

While some people have stories about getting burned with credit in the past, when managed responsibly it can be an incredibly valuable asset. If you want to know more about the advantages of using a credit card, read on to learn more.

1. Save on interest and fees

The biggest benefit of good to excellent credit is saving money. When buying a home, for example, good credit can easily save you tens or even hundreds of thousands of dollars on a mortgage loan. People with better credit often get a lower interest rate on auto loans, credit cards, private student loans, personal loans, and lines of credit.

If you plan to buy a home with a mortgage in the future, good credit might be a deciding factor in how much home you can afford and whether or not you can buy a home at all. But saving on the interest charge is just one of many ways having a good credit score can benefit your finances.

2. Manage your cash flow

When you buy a new purchase with a credit card, you don’t have to pay for it right away. The bank puts the money up when you swipe your card and you pay it back later.

If you pay off your entire credit card balance in full by the statement due date, a good habit to get into, you won’t have to pay any interest charge on the credit card purchase. So make sure you pay your credit card bill on time.

From the date you buy the purchase, you have the time until your next statement closing date plus about three weeks before you have to pay up. That can mean three to seven weeks of interest-free borrowing that allows you to pay off your balance on a date that’s convenient for you.

3. Avoid utility deposits

When you sign up for a new cell phone account or move into a new home and establish utility services, the provider will likely check your credit during the onboarding process. If your score falls below the company’s guidelines, you’ll have to put down a cash deposit to open an account.

In a nation where 78% of people live paycheck to paycheck, the added startup costs of utility deposits on top of moving costs can be financially challenging to say the least. Building a strong credit history can help you keep your cash in your own bank account instead of the utility company’s.

What is the Importance of Credit to You as a Student?

Building good credit is a lifelong process and one that requires great diligence and discipline. However, these days, the younger generation is not always equipped with the information needed to successfully build good credit.

Basic personal finance is not being taught in all curriculums, so younger individuals are ill-equipped to responsibly manage their finances. This is especially the case for college students, who are just around the age when it would make sense to begin building credit but also around the age where it is easy to fall into high amounts of debt.

Let us begin by explaining why having strong credit is important. Credit influences many different things, including (among others):

• Apartment renting – a low credit score can prevent you from renting an apartment
• Employment – a low credit score can prevent you from being hired by an employer
• Homeownership – a low credit score can hamper your ability to secure a loan to purchase a home

There are additional consequences as well, but these are some of the most notable. And while some of these things may not seem very important right now, especially for college students, they will become very important down the road. Most of all, building credit takes time, so you will want to start as early as possible and be as diligent about establishing responsible habits.

Overall, building good credit is extremely important for many aspects of life – housing, employment, and so on. Since length of credit history is a key factor in your credit score, it is optimal to start as early as possible and feasible. For college students, taking a slow and steady approach will help you to develop responsible practice and start to build a strong credit history!

What are 4 Important Rules About Using a Credit Card?

Using credit cards as “free money” can lead to financial destruction. Living in credit card debt can feel overwhelming, and getting out of debt can seem impossible. But credit cards aren’t inherently evil. If you use them right, they can raise your credit score, save you money on everyday purchases, and help you travel for free, as a few examples.

Using the simple rules below, learn to use your credit cards responsibly.

1.  Pay your credit card bill on time

Know your credit card bill’s due date. Paying your bill one day late is a $25 to $35 mistake. Interest also accrues on the balance immediately and daily. The longer you wait to make your payment, the more interest you’ll owe.

If you make a habit of making your payments late, the credit card company may also increase your APR. According to the Credit Card Act of 2009, credit card companies can increase your interest rate once your payment is more than 60 days late.

2.  Pay your credit card bill in full

You can avoid interest charges if you pay your balance in full within the 25-day grace period. It’s just like paying cash; you only spend as much as you have. If you only pay part of the balance, though, the remaining balance accrues interest. If you let the balance get out of hand, the debt may snowball, costing you much more than the original balance.

Although paying the monthly minimum keeps you within your contractual obligations and doesn’t affect your credit score, interest will accrue on the remaining balance. For example, paying the minimum payment (assuming a 2% minimum required payment) on a $5,000 balance with a 19% interest rate costs $4,985 in interest and takes 8 years and 4 months to pay off in full. Your $5,000 purchase almost doubles in cost.

If you can’t pay off your balance in full, then pay as much as you possibly can to reduce the interest you pay.

3. Keep your credit utilization ratio low

If you do leave a balance on your credit cards, keep it low. Your credit utilization ratio accounts for 30% of your credit score. Your credit utilization ratio is your total credit card balances divided by your total available credit. If your utilization ratio exceeds 30%, your credit score may fall.

Keep in mind that your utilization ratio is a combination of all of your credit card balances. If you max out one credit card, but another has a low balance, it may even out for the sake of your credit score. For example, if one credit card has a $3,000 limit with a $2,000 balance, but you have another credit card with a $5,000 limit and $200 balance, your utilization ratio would be 27.5%.

4. Only charge what you can afford

If you don’t have the money to pay the balance in full, don’t charge it. Many people use credit cards as a way to buy wants rather than needs. Instead, use it as a way to protect large purchases or to cover you temporarily, knowing that you can pay the bill off in full within the grace period.

Even if you think you’re getting a great deal that you have to jump on, the interest charges can trump the savings of the discount. Think long and hard before charging something you don’t need and can’t pay for right now.

What are 3 Pros and cons of Having a Credit Card?

Using a credit card can definitely make life easier, but it also puts a large responsibility on the spender. If misused, credit cards can leave you with debt, fees and poor credit. Knowing the pros and cons of credit cards can be the first step to making sure you benefit from using plastic.

Pros of using credit cards

Understanding the many advantages of using credit cards is essential to actually benefit from them.

Build credit

Credit cards, when used properly, can help you build credit. Using credit is generally a requirement for building credit. When you have good credit, the benefits can include better interest rates on mortgages, auto loans and credit cards, among other things.

Earn rewards

Credit cards can earn you rewards in the form of cash back or points, all for spending as you normally do. Many popular cards also offer sign-up bonuses that provide a large number of points if you meet the spending requirements within the specified time frame.

For example, the Capital One QuicksilverOne Cash Rewards Credit Card is a great card for spenders looking to get started with a simple rewards program. This card offers 1.5% cash back on all purchases, so you won’t have to worry about using the right card on the right purchases to earn cash back.

Don’t have to carry cash

Using a credit card is often more convenient than using cash, and it’ll often take up less space in a wallet than a wad of bills.

“Credit cards are a great consumer spending tool because they are generally accepted in most retail and business situations worldwide,” says Jamie Hopkins, professor of retirement planning at the American College of Financial Services.

Credit cards can be in your pocket at all times, ready to go whenever. Plus, if you lose your card, your issuer can just send you a new one. That’s not the case with cash.

Cons of using credit cards

Credit cards aren’t all rewards and sign-up bonuses, though. They are serious financial tools that can lead you to rack up debt and fees if misused. It’s important to know the problematic side of credit cards.

Potential to overspend

Credit cards can seem like infinite pools of money — and will get you into serious debt if you treat them as such. So if you do use a credit card, it’s best to keep tabs on your purchases to make sure you don’t spend beyond your means.

Can fall into debt

Overspending on a credit card is one of the most common ways to get into debt — and “in debt” is probably not a place you’d like to be.

One way to help prevent getting into debt is to create a budget and periodically check in on where your money has gone. Monitoring your spending can at least help you keep regular tabs on how and where you’re spending. Whether you use that information to curtail unaffordable cash outflows is up to you.

Fees and interest

Overspending can lead to carrying a balance — something that usually leads to being charged interest on that balance.

“Credit cards are a poor source of anything more than very short-term credit as they have very high interest rates,” says Dr. James Philpot, CFP and associate professor of finance and general business at Missouri State University.

Interest (and fees) can grow a balance to the point where it can get beyond the spender’s control.

Beyond interest, many credit card issuers charge fees for late payments, balance transfers, cash advances and foreign transactions, among other things. Some issuers even charge an annual fee just to use the card.

The best way to avoid interest and many of the fees that will get you into trouble is to pay off your balance in full by the due date every month. If that’s not possible, at least make the minimum payment on time to keep your account in good standing.

Here is more:

Credit card pros	Credit card cons
Can help you build credit if you’re careful about the way you use the card	Access to credit could lead to debt and spending beyond your means
May earn rewards	Typically need to pay interest if you carry a balance month to month
Protection against unauthorized charges	Spending too much on your card or missing a payment can negatively affect your credit scores
Enables you to leave cash at home	Fine print can be confusing
Lets you track your spending

How can Credit Make your Life Easier?

A lot of people don’t realize it, but credit cards help save us time. From not having to carry a wallet full of cash to consumer protection, credit cards make our lives easier in many ways.

Consumer Protection

Credit cards offer the protection you wouldn’t get when paying with good old-fashioned cash. When you pay with cash, your money is often as good as gone. Many credit cards offer extended warranties beyond the manufacturer’s warranty.

This comes in handy when buying electronics like computers and TVs. When paying for services, your credit card has you covered as well. If you pay for an event in advance and it’s canceled without a refund, if you paid by credit card, you can ask for a chargeback.

Contactless Payments

Why waste time counting bills and coins when you don’t have to? Contactless payment makes paying for goods and services easier than ever. With MasterCard PayPass and Visa payWave, making small purchases is as easy as tapping your credit card. This makes last minute trips to the supermarket for bread, eggs and milk a lot easier.

Budgeting

Budgeting and tracking your spending are a lot easier with a credit card. If you’re paying in cash, it can be a hassle to keep all your receipts (not to mention they can get lost). When you pay with your credit card, tracking your spending is as easy as reviewing your credit card statement. You can tally up all your spending and see if you’re under or over budget for the month. It doesn’t get any easier than that!

Path to Homeownership

By using your credit card responsibly, you can help build yourself a good credit score. Without a solid history of managing credit responsibly, it can be very difficult to obtain a loan. Plus, having no credit history can sometimes be as bad as having a poor credit history. By paying off your credit card in full each month, it can go a long way to getting approved for a mortgage later on.

Lightening Your Wallet

Money is heavy. Have you ever tried carrying a wallet full of cash and coins? It’s not a pretty sight! Not only are credit cards lighter, they’re safer, too. When you’re walking the streets alone at night, what do you feel safer with, a wad of cash or credit cards? I’m willing to bet the latter. With credit cards you have the added bonus of zero liability – if your wallet is lost or stolen, in most cases you aren’t responsible for purchases made by someone else.

Why is it Important to Start Building Good Credit Now?

Due to extending themselves beyond their means, many people cannot pay their debts. At the same time, general living expenses take a toll on people’s paychecks. Businesses have good reason to insist that you have good credit before providing products or services to you on credit.

Some employers are even beginning to run credit checks to see whether you can be trusted with company finances or other assets. If you have a history of not being financially responsible, you may run into problems finding work.

Credit Can Affect Where You Live

Before you can buy a house, mortgage lenders want to know that you won’t default on your mortgage. If you don’t have good credit, the lender will consider it risky to give you a mortgage loan.

If you’re approved for a mortgage, your credit affects your interest rate. Interest rates directly impact your monthly mortgage payment, by either increasing or decreasing the amount you are charged. Low credit scores will cause a loan application to be disapproved, or approved at a higher rate.

While you may not currently be in the market for a house, your credit is still important. Landlords also use your credit to decide whether to rent to you. Property rental is considered to be a loan, and owners want to be sure they will be paid.

Auto Loans Require Good Credit

Most people do not have the money to fund a vehicle and cover living expenses at the same time. Many will apply for an auto loan. Your credit rating affects whether you are qualified, the amount you can receive, and the interest rate of the loan. Generally, loan applicants with a higher credit rating can qualify for larger loan amounts with lower interest rates.

A low credit rating will limit your choices. Few lenders will work with you if you have low credit, and those that do will charge a much higher interest rate on your auto loan. A higher interest rate will significantly raise the amount you pay monthly on the car, which raises the total amount you’d pay over time.

Credit Checks For Employment

Many employers conduct credit checks as part of the hiring process. (Note that employers check credit reports, not credit scores. Some jurisdictions prohibit prospective employers from using applicants’ credit reports.)12 If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you.

For example, the employer might believe your level of debt is too high for the salary offered. Some employers also check credit reports before giving a promotion or raise, especially for financially-related or executive positions.

Business Loans Require Good Credit

Many people dream of starting their own business. Most business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan. Among other things, you need to have good credit to qualify for the business loan.

Living Expenses Can Require Good Credit

It might be somewhat shocking to learn that your credit is needed to establish utility services.3 Electric companies contend that you’re borrowing one month of electric service. Before turning on your electricity, the company will check to see if you have good credit. Most utility services conduct credit checks, including cable, telephone, water, even cell phone service providers.

You Need Good Credit To Live Comfortably

Since your credit is defined by how you’ve paid (or not paid) your bills in the past, many businesses—landlords, mortgage lenders, utility providers, and even employers—use your credit to predict your future financial responsibility. Anytime you need to borrow money, finance an essential item, or set up services, your history of paying bills (your credit) is called into question.

What are the 9 Rules for Using a Credit Card?

There are many benefits to using a credit card, but doing so can be extremely risky to your finances. For the people who decide to use credit cards, we recommend you follow these rules:

1. Never carry a balance

Carrying a tree is cool. Carrying a balance isn’t. According to a 2015 study by creditcards.com, the average APR on credit cards is around 15%. 15%!!! Avoid paying interest by never carrying a balance. Nobody will admit to carrying a balance on their credit card (except those who are in the process of aggressively paying down debt). Banks are getting rich off of somebody. Someone is paying the interest. Make sure it isn’t you.

2. Don’t use a credit card if you haven’t paid off your credit card in full every month for the past twelve months

With sky-high interest rates, credit cards are a terrible deal if you aren’t paying them off every month. There are some great benefits to using credit cards if you can use them responsibly.

How do you determine if you’re responsible enough? One great test is to look at whether you’ve carried a balance in the past year. If you’ve carried a balance in the past year you’ve demonstrated irresponsibility with your credit cards. Take a one year break from credit cards and use cash or a debit card.

Don’t make excuses here. I’m sure you have a good explanation of why you carried a balance. It doesn’t matter. You need to take a break from using credit cards. Quit using the credit card for a year, and focus on building up your savings to prevent carrying a balance in the future.

3. Build a budget before using a credit card

Credit cards are literally begging you to overspend. Take the first step of defending yourself by establishing a spending plan or budget.

4. Carefully Monitor Your Spending

It’s one thing to build a budget, it’s another to follow the budget. Track your spending and compare it to your budget. Make sure you aren’t spending more than you planned on spending.

5. Stop Using the credit card if your spending gets out of control

If you’ve followed steps 3 and 4 then you should know when your spending is getting out of control. One common mistake people make is thinking they aren’t overspending because they are paying off their credit card every month. If your spending isn’t in line with your budget, stop using the credit card. Freeze it in an ice block. Lock it up. Cut it up. Do whatever you need to do to stop using the credit card and get your spending under control.

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Credit card rewards can make you feel good about spending. You feel like you are being smart every time you swipe your card because it puts you that much closer to the trip you’ve been planning with your reward points. Don’t fall for this mindset. If your spending gets out of control, stop using your card. 2% cash back when you’ve overspent by $100, still puts you behind $98. It isn’t worth is to overspend.

6. Determine What Rewards Are Best For You

There’s no sense in using a travel rewards card if you will never use the rewards. Go with the card offering the rewards that suit you best. Maybe a cash rewards card.

7. Evaluate Your Fees

Some cards offer great rewards but come with an annual fee. Determine if you are getting enough value from the annual fee you are paying. Try calling your credit card company to negotiate down your annual fee (not every credit card issuer will lower it, but it’s worth a shot). 

It’s okay to pay an annual fee, just don’t pay unnecessary credit card fees. 

8. Be Mindful of Your Credit Card Limit

One of the factors used in determining your credit score is your credit utilization ratio. The ratio looks at how much available credit you are using. If you have a $10,000 credit limit and a $4,000 balance you have a credit utilization ratio of 40%.

Try to keep your ratio under 30%. Increasing your credit limit, and/ or decreasing your spending can help with this. You can also pay your credit card off multiple times throughout the month to decrease your credit utilization ratio.

9. Be Careful!!! Using credit cards can be like playing with fire. If you aren’t careful you will get burned.

Credit cards aren’t for everyone. While there are some great benefits to using a credit card, I don’t think credit cards are appropriate for everyone. If you can’t follow these guidelines, you shouldn’t be using credit cards. If you are perfectly content using debit cards or cash, stick with what you are doing.

Remember, someone out there is paying those outrageous credit card interest charges. According to nerdwallet, the average U.S. household carries $15,310 in credit card debt. Credit cards can destroy your life! Credit cards can be responsibly used, but you are playing with fire. If you aren’t extremely careful, you will get burned! Be careful!