There’s a lot going around about credit cards, not all good, and not for good reason. When I was a kid there was always perception that using a credit, card was bad because it meant you didn’t have the money. While that may be true for some, those who ended up going into debt, but actually using a credit card can make good financial sense, whether it’s with fraud protection that comes along with a credit card, easier to secure a hotel room or debit card, not to mention the rewards by making the normal purchases you would make anyways.
Unnecessary to Get One
If you want to take advantage of the most favorable interest rates on the market when it comes to getting a mortgage, personal loan, car lease, or even insurance, you need to have an excellent credit score. By using and paying off your credit card you can develop a solid payment history, not to mention your credit availability will improve your credit score, something a debit card is unable to do and will do nothing to improve your score.
Always Carry a Balance
The key words to the section above are “paying off” your balance is what will continue to improve your score, so keeping a balance on your card will not only hurt your score the closer the balances comes to your available credit, but you will also start paying interest if you don’t pay the full statement balance by the due date, which can be a slippery slope if you continue to pay interest and cannot dig yourself out of credit card debt, which could end up haunting you for years. Do yourself a favor and watch the spending enough where you can afford to pay off the card every month.
Close the Account When Balance is Paid to $0
Now if you have been in debt for a while and you have finally paid the balance down to zero, something that is a great accomplishment in itself, the first instinct might be to close the card so you don’t have to worry about getting into debt again. While it’s true you want to stay away from debt, what you should do instead is leave the account open but cut up your card, that way it can stay open at a zero balance and you don’t close the account and the available credit along with it. Closing account could actually surprisingly hurt your score by losing that credit.
Don’t Increase Credit Line
There really isn’t anything negative about increasing your credit line, unless you asked for one, which could be a few points dips by pulling your credit, but if it’s automatic, it will not hurt to accept to greater increase the window between balance and available credit, so why not continue to raise your credit limit. Just make sure that you don’t go on a spending spree when you’re tempted with the virtually endless credit limit that you have to spend on items of your choosing.