It’s easy for credit card debt to spiral out of control, which is why it is so important to protect yourself and use credit wisely. Similar to your health, you’ll want to take care of your credit, minimize risks and make responsible decisions. The best way to protect yourself is with education, so before you start spending, here are some tips for using credit wisely.
- Create a budget. We know it sounds a bit strange, but before you start applying for a credit card, you need to outline all of your income and monthly expenses. This will help you understand how much you have available to spend and how much debt you can afford to take on and repay.
- Only Borrow what you can pay back. Sounds simple enough, right? Often, people swipe faster than they are able to pay back and it can put them in a financial bind. A general rule of thumb to remember is to spend no more than ⅓ of your income on debt including mortgage, credit cards, and loans. And track your spending to stay within budget.
- Pay on Time. We mentioned how your credit was like your health – the better you take care of it, the easier it will be. A large part of your credit score is how timely you are with paying your bills. Avoid late fees and negative effects on your credit by paying on time every time.
- Carry credit card balances responsibly. Don’t freak out if you see a balance on your card, but if you do, make sure you are making the minimum payments each month. And aim to keep your balance below 30% of your credit limit at any time. Even if you pay your balance in full each month, getting too close to your credit limit can be a flag to potential lenders and can have an impact on your credit score.
- Be realistic. Don’t use a credit card to finance an unaffordable lifestyle. If you find yourself constantly using a credit card and not being able to pay the balance each month, then you should go back to step 1 and outline your finances to create a budget and a plan to get back on track financially.
Think about why you are applying for the credit card. Are you trying to make a big purchase or pay off another debt? Ask yourself: can this purchase wait or is there a better route? At Camino, we always recommend sitting down with one of our Member Advisors to ensure that you are making the right financial decision. We are more than happy to sit with you to discuss your options and provide financial assistance. Stop by one of our branches today or give us a call at (800) 835-3400.