15 Exceptional Habits of Smart Credit Card Users
Credit card is basically just a method of payment where you can use the card and the number that comes with it and pay for your purchases.
All you need to do is, use the card and the bank will pay for your shopping and the card will start counting your debt. There is an interest rate for everything that you do on the card and if you don’t pay those debts in time, your interest and debt will just keep rising.
There’s always a number of questions when it comes to credit cards for example – do you really need one? If you don’t use your credit card, do you still need to worry about your credit score? Most people use their credit card wrongly and thus miss out on several key benefits and end up getting burned by either high interest rates or unexpected fees and costs.
Let’s discuss everything in detail and find out how smart people use their credit cards.
- Maintain an Exceptional Credit Score – While this sounds great, you might want to argue – do I need it?
Ask yourself – Do you want to buy a house or a car or anything expensive ever in your life that will require credit?
Credit score is a tricky thing, if you don’t maintain an 800+ points on the FICO meter you might miss out on a lot of things. On the other hand, most basic requirements are already covered with a base points of 750+. Still, no point in missing out on anything good – so make sure to do your best when it comes to maintaining your credit score.
On the other hand, maintaining a 850 score would mean that you will have to limit yourself to a lot of things. You can’t apply for another credit card that way and miss out on so many of the benefits that comes along with a new credit card – all because you need to retain your 850 status symbol score! Try to strike a balance between what you need and how much credit score you want to maintain.
- Credit Score is a Process not an Activity – Maintaining a good credit score is a constant process and not an activity. Nothing is one off and should be treated as such.
Your credit score is much like your childhood naughtiness meter. You do need to be naughty, but not right before the exam results – especially if your expected results are anything like mine!
Plan things well, don’t use your credit card for anything much for at least a few months before taking up a heavy mortgage or something.
- Take Hard Inquiries Lightly* – Most people worry about hard Inquiries on their credit cards. But here’s the thing – you don’t need to worry about those because they aren’t permanent. They do take off some points from the credit score, so it is always good to make sure that you don’t get too many hard Inquiries on your credit card. Best to keep it as low as once a year or so.
Here’s a few quick questions and their answers:
- How long does Hard Inquiries on a Credit Card last? – They last for only 2 years at maximum but they only impact your credit score in the first 12 months.
- How long does Negative Inquiries last on a Credit Card – Negative Inquiries on a credit card can last up to 7 years!
- How long does a Negative Inquiries such as Bankruptcy last on a Credit Card – Negative Inquiries like Bankruptcy can last up to 10 years.
On the other hand, positive Inquiries can last forever!
- Take Control and be on Top of Everything – Hard Inquiries on your credit card can’t happen without your permission – but what if it does!
Unfortunately, not everything goes as per rules. In an unlikely scenario like that, make sure to dispute your hard Inquiries. No point accepting something that is wrongly done to you.
- Take the benefits of Credit Card Points – There is nothing like taking the benefits out of earned credit card points. Shopping is something you would do anyway but if you use your credit card for the shopping, you will earn points for every dollar spent.
Airline miles are another bonus that one can take advantage off. The more you buy airline tickets with your credit card and more free miles you receive, along with the signup bonus too. If you are a frequent flier, these free miles can lead to a free ticket in a few months time.
- Choose your credit card well – When it comes to picking up a credit card you need to keep several things in mind. There is a negative side of credit cards where there can be hidden fees or high interest rates etc. This is the reason why one should choose from the best 2016 credit cards and make sure to get a card that suits your needs.
Credit card companies are smart, they might say that the card is a zero percent card but do note that it is only a starting rate. That rate will change as soon as the promo period is over. Another important thing is the card type. It could be the same credit card company offering many kind of cards but the rules that apply on the student card might not apply on the business cards. Your best option here is to list down all the cards available to you and analyze then point-wise. Then pick a card based on your own findings.
Everyone has a different need and based on that, you should choose a card that is good for you. Here’s a few things you should take into account:
- Balance transfer cards. Look for a zero percent balance transfer card that transfers your existing balance from a high interest card at zero interest to a low interest card. This step alone can save you a lot of money.
- Are you a traveller? If so, then look for a card that has an attractive startup bonus. Some cards provides upto 75k+ points as a signup bonus which will give you a headstart. All these points add up quickly and you can start redeeming these points for flights, hotel bookings etc. in no time.
- Custom cash back – There are cards that offer more cash back percentage in select categories. Depending on the things you spend your money on, look for a cash back credit card that offers you 5% or more on the things that you buy more frequently.
- Get a free credit report – It is always good to know how exactly your credit report looks like. Before asking an agency to do a credit report, make sure to ask them if this report is free or not and clarify with your credit card company and the reporting company that such a report will leave a hard Inquiry on your card or not?
- Check Online Card Comparison sites – Internet is great when it comes to sites that has debt calculators or reviews and comparisons of credit cards etc. Even if you have already made a choice, there is no harm in learning further about the offers that are available on the table.
- Keep an eye out for the traditional off-line mail – Emails and cell phones have pretty much taken over the traditional mails which aren’t being used much. If you are like anyone else living in the fast digital lane, off line emails will sound like a thing of the past. While we hardly use off line snail mails for anything much, when it comes to credit card’s promotional offers – these mails are really valuable.
Credit card companies send great offers via. snail mail and you will be missing out on a lot of things if you don’t check your off line mails regularly.
- Pay off your debts in time – If you are trying to build a good credit reputation then it is best to pay off your debt in time and not delay payments and incur fines. Feel free to make some purchases if you have to, that way whatever the bills that you get in your card, you can pay those in time and build a reputation.
Make sure to pay the bills in your card every month, don’t let anything left behind for the next month. If you are unsure about this, if you are anything like me who has the best interests at heart but forget when it matters – setup an auto-pay system where your credit card will automatically charge your bank balance and pay off whatever that is due. Just make sure to keep enough funds in your bank account.
- Start as a Student – If you are a new credit card user, it is best to start low. Student cards are great to start with, however if you opt for a secure credit card with a credit limit that you pay upfront – it will act as your credit limit and keep you safe.
Additionally, it is a better idea to become an authorized user on your parent’s credit card. That way, not only the parent can monitor and make sure the child’s spending habits are good, the child’s credit score gets a boost too from the parent’s score.
As a student you might get tempted to have your friends and fellow students co-sign a credit card. This is a real bad idea, because if your friend decides not to pay or misses payments and gets buried in debt – the card will hold you responsible. You not only have to pay their debt, you will also ruin your own credit score in the process.
- Create an account on the Card’s website – Most of the time, this is completely optional which is perhaps the reason why many card holders don’t bother registering on their credit cards website. However, if you take out some time and register, then you can check your card’s status and recent spending or limits instantly. It is a great way to stay updated and be on top of everything. It is also a good idea to make sure that you get alerts on your cell phone and emails for anything related to the card.
- Opt for your own preferred due date for payment – Most people get paid on the 1st of every month, but that rule might not apply for everyone. If you get paid on a different day it is usually better to set the cards due date, a few days after your payday. That way it becomes easier to make the payment.
- Keep old credit cards running even if you aren’t using them – Cancelling a credit card affects your credit score negatively, so it is best to keep the credit card running even if you aren’t using it. At the very least, use it once a year and keep it safe. That way, the card will stay functional.
Cards can get cancelled due to lack of use, thus it is important to use the card at least once a year to keep it running.
- Stick to a single credit card to start with – When you start off, it is best to have a single credit card and maintain it well. Applying for multiple credit cards too quickly can hurt credit score negatively. At a later time when you become an established credit card user, you can opt for multiple cards and it will have a less significant effect on your overall credit score. As a student, one credit card is just enough.
These are some of the good habits that a credit card user can include in their lifestyle. In short, use your credit card smartly, pay your dues in time and respect your credit score.