Personal Finance Tips for Managing Credit Cards Effectively

Having credit cards isn’t necessarily a bad thing but there are some things you can do to make sure you don’t end up drowning in debt in the near future. Even though credit card spending in the United States continues to reach record levels year after year, many consumers do make smart choices when it comes to managing their credit cards. When you use your credit card for emergency expenses or take advantage of rewards programs with large payouts, you could be putting yourself in a better financial position than not having credit cards at all.

Use these personal finance tips to manage your credit cards effectively:

Pick the Right Rewards Credit Card

Credit card rewards programs can help you earn cash back on every dollar you spend and earn points towards other items you want or need. Make sure you are choosing a rewards credit card that offers an attractive cash back bonus on big-ticket items you plan to purchase on credit. If you’re a frequent flier or a student, choose a rewards credit card designed specifically for you. As long as you are paying off the balances of these cards in full each month, you could be enjoying a number of extra benefits.

Don’t Use Credit Cards for a Cash Advance

Cash advances can seem like a very attractive option when you’re low in funds or want to buy something that is slightly out of your price range at the moment. Unfortunately, cash advances can also cost you a lot in interest, and will also hurt your credit score. Don’t use credit cards for a cash advance unless you are dealing with an emergency and have absolutely no other options.

Check Your Credit Score Balances

Check your credit score at least once per year to make sure the balances on your credit cards and credit card numbers are accurate. Checking your credit score regularly not only reduces your risk of identity theft but also ensures that there are not any big errors or mistakes being reported to future lenders and other individuals reviewing your credit report. Make sure the balances of credit cards and all credit cards you own are listed accurately on your credit report.

Reduce Your Debt Load to Less than 30% of Available Credit

Calculate your total available credit, then add up the current balances of your credit cards. Divide the balances by the total available credit to determine your debt load ratio. Your goal will be to reduce this amount to 30% or less. Any more puts you in a poor position for obtaining low-interest loans in the future, and can also have a negative impact on your credit score. Keep in mind that mortgage lenders do look at this figure when extending a proposed interest rate or loan offer to you.

Learning how to manage your credit cards and debt effectively can be challenging, but there are some things you can do to get yourself ahead. Use these personal finance tips and strategies to manage your credit cards more effectively and stay out of serious debt.