There is so much information floating around as to how you should spend your money, or how you should only use your credit card during these certain times, but only if there’s this much balance on it, etc.
Allow us to simplify.
How should you be using your credit card, you wonder? Here are the basics!
1. Start in University–or even earlier
When I first started in university, I got my first credit card. Not because anyone told me too, but I figured that I was an adult now, and that sounded like an adult move. Turns out, it was a great idea.
The card had a whole $500 limit. Sounds like chump change now for a limit, right?! But it was the way to go. Maybe a bit more could be more sufficient. I didn’t overspend, though I wanted to often, as a first-year student in university and I wanted to make the time memorable. Mostly only books and coffees would go onto the card which there were more than enough of to need to make regular payments!
If the account isn’t used often, your credit report could still get better. How so?
Lenny Credit states in an online article, “It shows an ability to get approval–lenders will see it as an endorsement from other lenders.” Also, “The more lenders who see you as a good risk and are willing to advance you credit cards or lines of credit, the better your score can look–provide you manage it correctly.”
When you have a credit history right off the bat, it is a fantastic thing. And the longer the history, the better! Start as early as possible (within reason). Lenders realize you are a reliable person over a long period which will make them more likely to give approval.
Even having more than one could be helpful! But sticking to the low limit at the same time. You want to do the most you can to have strong credit. If you know you can be a responsible person.
2. Use the card for everyday expenses
Credit cards should not be only for ‘just in case’ or ’emergency’ scenarios. Hardly any benefits come from having credit if it’s not being used–stays stagnant, and you want to be making it better and better.
You want to have an emergency fund, of course, as life is unpredictable. Though, this should be part of your savings rather than being reliant on credit. Use the card for everyday expenses instead to take advantage of the benefits of having credit in the first place. Groceries, clothes, gas, for example! That much-needed morning Tim Horton’s run.
But be sure you have the money right now. That is essential. Living within your means is necessary, so you don’t go into a black hole of debt and spending. It’s easy to get carried away before you even realize what is happening.
So, make a budget and stick to it! Write realistic goals with your significant other and family members. Beyond those big-ticket items such as house bills, medical expenses, car and phone payments. Create a list of errands for the day or the week too. Whether it’s picking up more laundry detergent or pet food and keep those pesky impulse buys out of the equation. They add up fast! Or, include a part of the weekly budget if you must specify for that reason. Just be sure you can afford it.
4. Protect your money!
Financial fraud happens more often than people think. Protecting your finances is an essential part of being money-savvy.
The same article states approximately 147.9 million individuals in the United States were victims, plus 19,000 Canadians, and many also in the United Kingdom.
Victims of what exactly? Their personal information being accessed and stolen, and therefore potential access to their finances and more.
“… Names, addresses, social insurance numbers (SIN) and, in limited cases, credit card numbers among the personal information potentially accessed,” states CBC in an article released shortly after the breach last year.
NBC News shares great ways to make sure your money is safe, one of them being to monitor your accounts regularly. Free credit reports can be retrieved from Equifax (oh the irony) or TransUnion once a year. It also recommends going to a monitoring and protection company to be extra safe.
Not to mention the rise of “contactless” cards, also known as “tap and pay.”
Global News expressed back in 2015 that, “Despite the convenience, these types of credit cards could also make you vulnerable to being skimmed without it ever leaving your pocket.” Basically, the thief can get a hold of your card information from just being close to you and not even coming into physical contact with the card.
A study conducted by VISA on “perceptions of trust and security around payment methods” found that tap and pay is fast becoming the favored payment method, according to more than half of the respondents.
It also states that “In addition, eight-out-of-10 Canadians view contactless cards as a very convenient way to pay, and 45 percent view it as very secure.”
Though, debit and credit cards come with a $100 limit with the tap and pay, which is a relief. But more and more reasons are popping up as to why everyone should protect their money.
4. Pay it on time!
Business Insider goes into detail of a situation where a woman simply forgot to pay her credit card bill on time.
“Though she paid the late bill over the phone soon after,” the article states, “the incident came back to haunt her when she went to apply for a mortgage four years later when the underwriter questioned the gaffe.”
Anyone can set up an online payment in 5 minutes! You will be hard-pressed to find a financial institution these days that doesn’t have online banking or scheduled payments available. This has been a lifesaver for me countless times. Personally, I would never remember to put shoes on my feet ever, besides the fact we live in winter for most of the year.
Furthermore, paying your bill on time is a big, huge, important part of having a credit account of any kind. It is one of the biggest indications that lenders take into consideration with the decision of approving.
To be specific, according to The Balance, “Thirty-five percent (35%) of your credit score is based on whether your payments are made on time. Your credit score benefits the most if you consistently make your credit card payments (and all your other payments) on time.
Besides that, payments made on time is part of what keeps your monthly payment low, your interest rate and insurance rates low.
We hope this helps! For more information on credit protection, restoration, and improvement, visit creditcanada.net.