How to Use Your Credit Cards Responsibly to Avoid Debt And Boost Your Credit Score – Part 1

Credit cards can be good for you - if you have a smart strategy

Image Source: Flickr User Hamza Butt

Some North Carolina consumers are gun shy about credit cards because they’re worried if they have plastic in their wallet, they will wind up in debt. Millennials, in particular, tend to rely on debit cards and cash, so they don’t pile on credit card debt on top of student loans and other expenses. Going with cash only is not a terrible approach, but can keep you from establishing a good credit score. Here’s a look at the first three of seven tips to help you use credit cards wisely to boost your credit score while also avoiding debt.

#1 Use Your Cards for Necessities and Not Indulgences

It may sound strange to use your plastic for necessities, but here’s why it’s smart. To keep your card issuer happy and giving you credit limit increases (which help your FICO score), you need to use your cards. Using them for bills and then paying them off immediately means you didn’t add any additional expenses into your budget, but you’re utilizing your cards to boost your score.

Utilities, cell phone, groceries, and gas are all healthy choices. You do not want to use your plastic to indulge in a new flat screen TV or flashy clothes. If you can’t afford to pay the debt off at the end of the month, you can’t afford the item. Period. Credit cards should not be used to increase your spending. They are a tool to keep your credit score in good standing and as an emergency fallback.

#2 Pay Off Your Balances in Full Each Month

If you’re using your cards responsibly to pay for ordinary expenses, there’s no reason you should not be able to pay your balances off in full each month. If you pay off your balance, you shouldn’t have any interest charges building up, so there is no cost to use the card to pay for your standard costs of living and other recurring items like Netflix, Spotify membership, etc.

As a secondary measure to make sure you don’t rack up debt, you can pay off credit cards twice a month – once on each payday. If you charge bills to your card, pay the card off with the paycheck you would ordinarily usually use on the bills. That way you get your bills paid, your card has activity, and your budget is unchanged.

#3 Take Advantage of Rewards

Rewards credit cards these days offer a wide array of incentives to get you to choose and use their card. Rewards cards can be great, but only if you win the game. Card issuers that offer rewards pay for these incentives by encouraging cardholders to spend and not pay off their balances at the end of the month. Carrying balances triggers interest charges that cover the costs of the incentives plus profit.

However, if you use rewards cards then pay them off immediately after charging, you get the reward without paying any interest. A smart strategy gets you the best of both worlds. You get the benefits, don’t accrue debt, don’t pay interest and still earn rewards. Be careful which rewards card you choose to ensure the rewards are ones you will use and that aren’t so inflexible they can’t be utilized.

If you’re struggling with credit card debt, there is a way to get a clean slate and fresh financial start. Contact the Law Offices of John T. Orcutt today to learn more about the benefits of North Carolina bankruptcy. Call +1-833-627-0115 for a free consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.