These days, it’s fair to say we live in a plastic world. The ‘cashless society’ is closer than ever, with most of us almost fully reliant on our credit and debit cards. In particular, credit cards can provide a range of benefits when used well, including better debt management, cash flow solutions and an array of perks and rewards.
Used poorly, however, and a credit card can get you into a world of trouble. In fact, good credit card management has become an essential part of remaining financially organised. Whilst there are plenty of little tips and tricks out there to help you stay in control, here are four fundamental habits you should be practising to keep your credit cards in check.
In full and on time
It’s probably the simplest but most important rule to adhere to paying your credit cards bills in full and on time is the only way to ensure you enjoy all the benefits with none of the drawbacks.
What happens if you don’t pay on time? Damage to your credit score, yes, but your inability to pay off in full may well be indicative of a larger spending problem. Not living within your means will result in late fees, interest and potentially a dangerous debt cycle.
With that in mind, schedule your payments, and make sure you’re only spending what you can afford.
Trim the fat
Are you one of those people with an impressive collection of credit cards? If you are, aside from making your wallet or purse look a bit fancier, what are they actually doing?
Whilst it’s easy to open up a number of accounts as you chase perks or seek out fancy new deals, it’s even easier to lose track of your spending across multiple accounts, which can lead to the sort of results mentioned above.
Trimming your card stash down to the two or three most useful accounts will help you maximise rewards, better track your spending and stay in control of your credit card behaviours.
Keep utilisation under control
Your credit utilisation is measured as what percentage of your total credit you are using. For example, if your card has a credit limit of £1,000 and you’re currently using £400, then your utilisation score is 40%. Utilisation levels are something providers monitor closely; use too much of your credit and you’ll be seen as more of a risk, therefore lowering your score.
The golden number in credit utilisation is 30%. Keep your usage levels lower than this across all of your credit cards and your credit score will see the benefit. However, it’s important to acknowledge a balance between distributing your arrears in a considered manner and spreading yourself too thin.
Again, two to three cards should do the job.
Step away from the card
It’s easy to get carried away with your spending in our buy now, think later culture. With that in mind, taking some time away from your card every now and again might just help save you a little money.
Going out without your card puts you in a situation where you can only spend what you have, rather than the seemingly infinite amount hidden behind your card. Whilst most wouldn’t advocate for a complete card cleanse, making a conscious effort to budget around your cash funds rather than future debt is a key skill to keep you on the financial straight and narrow.
When it comes down to it, credit cards can be a blessing and a curse; it just depends on how you use them. By practising better card habits, you’ll be giving yourself the best chance to succeed in getting the most from your provider, without having to worry about any unpleasant surprises.