If you’re reading this, you probably have at least one credit card already. Credit cards can be a helpful tool when used appropriately, including helping you establish credit and build your credit score. However, you can also get into some serious financial traps and damage your credit score if you develop bad habits with your credit cards. Here are some tips to help you avoid going down the wrong path so you can better manage your finances. You can also check out our Credit Card Tips sheet for additional information.

Looking for a New Credit Card?

If you’re in the market for a credit card, there are some important factors to keep in mind. First, do you already have a credit card? If so, why do you need an additional card? Typically, one is all you really need. If you open several new accounts within a short period of time, your credit score could be damaged. You could be perceived as a higher credit risk because you increased your capacity to take on more debt, which might ultimately be hard to repay.

If you’re looking for your first credit card, be sure to compare different offers and find the card that will work best for you. Here are some things to look for in a credit card:

  • Find a card with the lowest interest rate
  • Avoid outrageous fees (make sure you read all the fine print to understand what fees can be charged)
  • Be cautious of low introductory interest rates that can increase greatly after their initial low interest period

Managing Your Existing Credit Cards

Once you have a credit card, it’s best to have a solid game plan in advance and stick to it so you don’t get in trouble financially and find yourself with a high balance that seems impossible to pay.

Here are four goals that will help you stay in control of your credit cards:

  1. Try to pay your balance in full each month.If you think of your credit card as an extension of your bank account, you won’t be tempted to charge more than you can afford to pay directly from your checking account. Just remember to not charge more than you could pay if you had used your debit card.
  2. If you can’t pay your balance in full, then try not to carry much of a balance from month to month.Your goal should be to pay more than the minimum monthly payment due so you can pay down your balance as quickly as possible. Keep in mind that the balance you are carrying will also be charged interest, which can make that original purchase a lot more expensive.
  3. Don’t be late with any of your payments.Make sure you know when your due date is each month. Even if you plan to pay the balance in full, it’s important to make that payment on time. You may want to set a reminder for yourself so that you won’t miss that date. If you are late by even one day, your credit card company may impose a higher interest rate on your card and charge late fees. Additionally, being late on a payment will likely lower your credit score.
  4. Avoid impulse purchases and cash advances.Just because you have a credit card doesn’t mean you’re obligated to use it. Although it might seem easy to buy something expensive with your credit card, it would be far better to take a little longer and save for that purchase. Again, remember that if you use your credit card to buy something expensive this month and it takes you several months to pay for it, you’ll be paying a lot more than that original purchase price with the added interest charges. And finally, don’t use your credit card for cash advances at the ATM. You could pay a fee for using your card for a cash advance and will normally pay a higher rate of interest on that transaction.

Remember, credit cards can be a helpful financial tool when used responsibly. If you currently have a balance with a high interest rate and you’re looking for a smart way to pay off that debt, one solution you might explore is using a personal loan to pay off your high rate card balances. You can find more information about personal loan solutions as well as additional tools and resources at U-fi.com.

Ron Hancock
Written By:

Ron Hancock is the Regional Director for U‑fi Student Loans and is an expert in many aspects of financial aid, student loans, and debt management. A graduate of the University of Oklahoma, Ron has worked in a number of areas of higher education finance, including positions in a college financial aid office, training and development for a state agency, and most recently as National Manager for Nelnet’s Partner Solutions team. Ron has spoken at numerous financial aid conferences all across the United States.

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