As with any habit, it’s important to remind yourself to follow through on your commitment to use your credit card in a healthy way. Along with practicing good habits, overall strong financial habits will create a game plan you can follow to reach your goals. With your visual goal of a better credit history in mind, starting the following credit card habits now can help you get to where you’d like to be.
Habit 1: Pay Balances on Time
The best habit is to pay your credit card balance each month in full and on time. Know when your payment is due to be sure your payment is received in time. Schedule or pay before the due date to avoid potential interest charges on purchases or late fees. (Check with your creditor for terms and conditions.)
Your credit card company likely offers automatic payments, so you can select to have your credit card bill paid directly from your checking account. That way you don’t need to remember to set up your payment and you can have the ease of mind knowing that your bill is being paid on time. Set up reminders on your phone or calendar, so you know when your payment is coming up.
Habit 2: Plan How Much to Spend Each Month
Plans can help keep you on track. Start with how much you can afford and set goals for your budget. Your monthly budget is your plan. Don’t charge more on your credit card than you can afford to pay back. Remember to calculate recurring charges that you have set up automatically to your credit card (like insurance payments or video streaming services) into your budget as well.
Outline your budget plan for the entire year so you know what limits you want to hit each month. Need help remembering your spending amount? Put your monthly budgets in a visual spot so that you see them every day, such as on a mirror, bulletin board, or on your phone. Set aside time to remind yourself of goals each week and practice healthy spending when purchases do arise.
Habit 3: Prevent Avoidable Charges (And Don’t Let Fees Grow)
A good habit is to prevent avoidable charges on your credit card. By not letting avoidable fees grow, you can concentrate on paying off your original balances and not worry about extra charges on top of that. Paying your balance in full and on time is the best habit for credit card use.
If you default on payments or have insufficient funds in your checking account to cover your payment, additional charges will likely be added to your original credit card balance in the form of late fees or returned check fees. These charges can often be avoided by paying at least the minimum amount required on time each month and having the funds available to cover it.
Habit 4: Don’t Make a Habit of Transferring Credit Card Balances
Simply moving balances from one credit card to another is not a good habit. It’s a healthier practice to put a plan in place to pay off the card’s balance instead. Your budget and spending habits determine your overall balances and total credit card debt more than any other factor. Healthy spending means less debt.
Habit 5: Watch Your Credit Card Activity
Are you noticing how much you’ve charged to your credit card? A good habit is to access your online account to help keep your balance in mind as you progress through the month. Some credit card companies allow you to set up alerts if you’re approaching or spend past a certain dollar amount for the month. Using a credit card app can help you quickly access your current total and last purchases so you can know where you are at.
Pacing your spending and planning out larger purchases, if possible, can help you keep within budget. Documenting your transactions will help you know in what areas you may be overspending–so you can be on the lookout for areas that break your budget. Armed with this knowledge, you can be more conscientious of keeping in your budget.
Habit 6: Discuss Usage with Other Authorized Users
You may share your credit card account with another person, such as your spouse. If you have authorized users on your account, it’s important to remember you are still responsible for paying for your total credit card balance even if you’re not the one spending and your spouse is. If you share your credit card account, ensure the person on the account with you acts responsibly with spending.
Habits Make Us Who We Are
Healthy, responsible credit card use can help you build a stronger financial history. Your financial standing can improve as you begin focusing on not overspending, planning with a budget, and paying your bill in full and on time consistently over time. Day by day, your healthy credit card habits can make you a more desirable credit card user and can help improve your credit history.
This information is presented for educational purposes only. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.