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- My father told me that a credit card isn’t an extension of your earnings; it’s borrowed money that the lender anticipates will be paid back.
- Once I received my first credit card, he advised me to make small, affordable purchases and to avoid carrying a balance whenever possible.
- He likewise cautioned me against making late payments and advised using my credit card wisely.
After graduating from college, starting work, and purchasing my first home, I concluded it was time to get my first credit card Once I held the card – along with its substantial credit limit – I imagined using it to complete decorating my new apartment, purchase airplane tickets, or pay for weekend breakfasts.
During an easy chat with my father, I brought up getting a new credit card. He didn’t seem too pleased about it. “A credit card? It’s the fastest way into debt! Make sure you use your credit card wisely,” he warned me.
Credit card debt hit a record peak. over $1 trillion According to a report from the New York Federal Reserve, his statement holds true: Americans currently bear the greatest amount of credit card debt in history and are consequently subjected to elevated interest rate charges.
Following my discussion with my father about using a credit card wisely, these are three tips that have stuck with me over the past two decades:
1. Begin with small, achievable fees
Rather than instantly putting that $2,000 dining room table on your credit card, opt for more manageable expenses that you can swiftly settle without sinking into debt. Using a credit card for something unaffordable leads to extended periods with outstanding balances, causing those amounts to swell from accrued interest.
Recognize that a credit card does not increase your earnings. Instead, it provides borrowed funds from the credit card company that they anticipate will be repaid.
When purchasing my new sofa, rather than using a credit card and paying for it over several months, I waited until it was discounted during the Black Friday sale (40 percent off) and then bought it with cash.
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2. Settle the remaining amount each month
The best approach to using a credit card is to clear your balance each month to avoid falling into debt. Given that many credit card interest rates are in the double digits, maintaining a balance can lead to significant additional expenses for you.
Additionally, whenever you settle the full credit card balance each month, your credit utilization ratio remains low, which positively affects your credit score. If you exceed 30%, it could negatively affect your credit. credit score .
3. Never pay late
As soon as those monthly credit card statements arrive, the crucial step you have to take is making the payment. at least The smallest payment required by the deadline. My father takes his credit seriously, as do I.
If you make a delayed payment, you might incur a late fee along with interest charges on the remaining amount due. Additionally, such delays can negatively impact your credit score.
Once you establish your online account, you have the option to configure complimentary text or email reminders that will alert you several days prior to your billing deadline. Alternatively, if you're confident with tracking your expenses, go a step beyond by enrolling in automatic payments to ensure you never miss a payment date again.
Have you ever had trouble paying your credit card bills leading to delinquency or even default? We want to hear about your challenges and successes regarding your credit scores. Reach out to this journalist at jstreaks@Pawonation.com.
The initial publication of this article took place in November 2023.
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