Credit Card Considerations

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A recent study revealed that Canada is rated number two in the world for credit card use.  American isn’t far behind them. Financial experts agree that the use of credit is getting out of hand as even those who do carry it responsibly aren’t immune to spiraling out of control when financial hardship strikes. Here are a few tips for making the most out of your credit cards:

1. Keep lower balances — this probably seems like an obvious one, but most people don’t know that a balance over 30-40% of the available limit on the card is detrimental to their credit score. Aim to keep your balances below this threshold if you want your credit card to build and not destroy your credit score.

2. Use with a purpose — credit isn’t a tool for convenient spending, it should be part of your credit building plan. Don’t just make a purchase because you have room, be sure you can afford the monthly payment and to pay off that purchase in no more than six months.

3. Pay with cash — there are times when using credit is not beneficial to your credit profile. Just because you have credit doesn’t mean you have to use it. If you already have a  balance near 30% of the limit, stick to cash for a while so you don’t inflate your balance.

4. Ask for a better rate — even if you have credit debt you can still get a better rate on your card. If you have made timely payments and haven’t had trouble with default, most companies are willing to negotiate your terms. You just have to ask.

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