Basic Credit Card Advice

Understanding how credit cards work should be an important part of your life. Unfortunately, many people with credit cards do not understand how credit cards work and this can lead to a slew of financial problems.

Credit Score and Paying off Your Balance
Proper use of your credit card will improve your credit score. This number will determine the interest rates you will be charged on things such as credit card balances, loans and mortgages. A better credit score will save you from excessive and unnecessary costs.

In addition to avoiding late payment fees, paying off your monthly balance on time is an important part of maintaining your credit score. If you chose to make your credit card payments manually, it is important to setup reminders for when your billing cycle ends to ensure you do not miss a payment. An alternative to paying manually is to setup automated payment with your credit card company which will help ensure you wonít miss any payments.

It is strongly recommended that you do not just pay the minimum amount due on your monthly bill. If possible, you should be paying the full amount due at the end of every billing cylcle. Credit cards are notorious for charging high interest rates on the running balance on credit card bills. Additionally, most people in credit card debt usually get there by only making the minimum required payments every month so it's important that you pay off your balance so that you won't fall into the same trap.

It is also important to avoid maxing out your line of credit. The ratio of your credit balance to your credit limit (known as credit utilization) is another key factor in determining your credit score. Experts recommend that you keep your balance to at below one third of your credit limit. That means that in months when you know you will be exceeding this threshold, you should consider paying off a portion of your balance early in order to maintain a favorable ratio.

Security/Monitoring Statements
While all credit card today offers some sort of fraud protection, the best method for protection still remains proactively securing your card. Simple things like keeping your belongings in a safe place and keeping your eye on your credit card whenever you use it are simple steps you can take.

It is important to review your monthly statements. However, this is often not enough; reviewing your credit card activity through your credit cardís website for any charges that you donít recognize since a rapid response to any unauthorized charges is very important. The faster you address credit card fraud, the less damage that will be done.

Another benefit to reviewing your charges often is the fact that it allows you to monitor your own spending habits. You can see where you spend the most money and decide which purchases are really necessary. Tracking your expenses is an important part of maintaining a balanced budget. Good budgeting skills are essential for having a credit card. It is easy for credit card owners to fall into the trap of charging every expense and not realizing that they will have to pay those expenses later. This is one of the most common credit card pitfalls.

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