Other than for emergency purchases, the main argument supporting credit card usage is that it helps to build credit history. However, while using a credit card is a good way to build credit, when not used responsibly, it can quickly lead to major debt. By following the tips outlined below, you can improve your credit score by using a credit card without going into debt.
* Pay off your balance every month. Charging a little bit each month is a good way to build up your credit score, but charging more than you can afford to pay off at the end of the month creates poor spending habits. Although some experts suggest that you should carry a balance from time to time to increase your credit score, it is not a good idea for many people with poor self-control or high interest rate cards. Whenever possible, pay off your balance each month or pay as much as you can over the minimum to avoid accumulating debt and unnecessary interest charges. On the other hand, having a credit card that you never use doesn’t do much to improve your credit score. Be sure to charge a bit every month, but pay it off as soon as possible.
* Avoid 0% introductory offers. In theory, low interest introductory offers appear to benefit the consumer, but they can easily backfire if you’re not careful. These offers are based on the principle that what you charge now can be paid off later. After all, if you aren’t accumulating interest on what you borrow, why bother to pay it off? Even if you plan to pay off the balance before the end of the introductory offer, this type of thinking can create poor spending habits. Also, low introductory offers are often used to trick consumers into signing up for cards with high annual fees or exorbitant regular interest rates. If you don’t get the balance paid off by the end of the introductory period, you could be stuck paying interest as high as 30% on the remaining balance.
* Don’t make excuses. When you’re contemplating a purchase, don’t allow yourself to use your desire to build your credit score as an excuse to buy things that you otherwise wouldn’t. Building credit by using a credit card should be a slow process that naturally happens over time via the purchases you would normally make. Don’t increase your spending and your chances of getting into debt by using your credit score as an excuse.
These are just a few of the ways that you can improve your credit score by using a credit card responsibly, without accumulating unnecessary and stressful debt. Remember that credit cards can be helpful tools that only cause problems when used inappropriately.