Using a credit card right is not just about having it and putting the occasional expense on it. You need a somewhat planned approach, and you have to keep a few things in mind if you don’t want to see a negative impact on your credit score in the long term. That’s right – using a credit card wrong can actually hurt your score instead of helping it! It’s not just about failing to keep up with your monthly payments. There’s more to it than that.

A credit card must be used actively in order to have the maximum possible positive impact on your situation. Your credit score takes your “credit utilization” into account for the main calculation. And considering that a credit card is essentially an open line of credit, you probably get where this is going.

Planned Monthly Expenses

Naturally, the best place to start are your planned, ongoing monthly expenses that you know and can rely on. As long as you think a few steps ahead, you should be able to create a system where a good number of those expenses are charged to your credit card, which you then pay off as normal at the end of the month.

This can not only give you more flexibility in your finances, it can also improve the rate of utilization of your card by a significant margin, putting you in a better position for any loans you might want to take out in the future. Talk to your regular stores as well. Some of them might have special programs for credit card users, especially major grocery store chains and similar places. You never know what kinds of bonuses you might be missing out on simply by choosing to pay in cash!

Emergency Expenses

Emergency expenses are a good way to put your credit card to use. While they won’t happen often and can’t be accounted for, they can allow you to utilize your credit card to its full potential whenever you run into situations like that. Keep in mind that not all such expenses can be charged to a credit card, however.

For example, some hospital bills might require different forms of payment. You might still be able to make those through a middleman service, so look into what the market has to offer. Of course, be reasonable. You don’t want to end up paying a significant percentage of the original sum on top of it just because you’re going through a third party. A credit card isn’t always the ideal option, so study each situation carefully, and know what your money is being spent on exactly.

Trips and Special Occasions

Planning to go somewhere? This can be the perfect occasion to use a credit card as well. Charge the entire trip to the card, and even use it for purchases abroad. Just make sure that you follow the appropriate security guidelines of your issuer in order to avoid falling for scams and other types of fraud while you’re traveling.

It’s also a good idea to check if you have any cards with special travel-related bonuses. Sometimes, you might be able to get access to special lounges at airports, get priority at events, and other similar perks that aren’t possible without the right card.

Big Purchases

If you have a major purchase coming up and you’ve planned for it appropriately, you can put that on your card as well. As long as you already have the money saved up and know you can pay off the bill at the end of the month, that’s all that matters. A big purchase on your card can be a particularly good boost to your credit score, and will look great in the eyes of lenders in the future.

This applies for things like home appliances and electronics, bicycles, and more. Of course, when it comes to something more major – like a car – you might be limited in your options and may want to talk to your bank first. But other than that, you should definitely take advantage of your card’s spending potential in those cases.

A credit card can either be a very useful tool in your personal finances, or it can cause a lot of trouble. It’s all up to how you use it. As with any other tool, it can be worthwhile to take some time to study how it works and know what to expect at each step. Otherwise, you’re just shooting blindly. And when it comes to something that can have such a major impact on your finances, that’s hardly ever a good idea.

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Credit Card Loyalty Programs – Are They Worth It?

When looking to get a credit card, you might often notice companies advertising special loyalty programs for some of their own cards. And while this might seem like a cheap marketing trick, it’s often more than that. Many of these programs can be worthwhile if you are prepared to use them right, and they can make an otherwise mediocre credit card offer transform into a much more attractive one.

Of course, not every loyalty program is equal, and you’ll want to pay attention to what you’re getting. In some cases, the special conditions of the program might look good on paper, only to turn out to be more or less unmanageable with your lifestyle.

You Need to Be an Active Spender

And that’s a good place to start – how much are you willing to spend on a regular basis? If you’ve already had credit cards before, this can be easier to figure out. But if it’s your first time taking one out, you might not have a very clear picture in your head. In any case, it’s always a better idea to estimate on the side of caution. Don’t get a card that will require you to spend more than you’re really comfortable with, because the effects can stack up quite fast.

Also, consider the option of transferring one of your current credit cards to the new one. If you can use the new card in place of the old one for more or less the same things, you might be able to get away with paying less as you won’t have to deal with two separate lines of credit and the implications they bring.

Not All Programs Are the Same

As we mentioned above, not all credit card loyalty programs on the market will offer you the same benefits, and you must be careful in your choice. Use the internet to do your research thoroughly, and know what the fine print under each deal says. That’s often where the most important bits are when it comes to attractive-looking credit card deals.

Time-Limited Deals

On the note of using the internet, you may also want to set up some alerts to notify you when you have a new deal available that matches certain criteria. This can make your search a much easier process, and if you’re not in a hurry to get a new card right now, you can take your time and wait until something more attractive comes along.

Some of the best deals on the market will only be available for a short time, requiring you to act fast. And while companies sometimes rely on a sense of urgency to get you to act on those deals, if you’ve been doing some research for a while, you’ll be able to approach this with a prepared attitude.

Special Rewards

Sometimes, loyalty programs will offer you rewards that go beyond discounts at regular stores. Airline miles are a good example of that. Some of these deals may work better for you, depending on your life circumstances. If you travel a lot and purchase airplane tickets on a regular basis, for example, then the above types of rewards will obviously be more useful to you than the average person.

In some cases, you might even end up saving hundreds of dollars on expenses that you would have made otherwise! However, these types of credit cards are often rare and not easy to come by, and you’ll need to be patient in your search. Once you’ve found a good deal though, you’re all set.

Maintaining Multiple Credit Cards

Remember that you should not go overboard with this. Just because a card offers nice rewards doesn’t mean that you should necessarily get it. After all, there’s a limit to how many lines of credit you can realistically maintain, especially if they all require special types of purchases and other activities. With that in mind, try to limit the total number of credit cards you have.

Remember that any unused credit cards will reflect poorly on your credit score as well. That’s because they’re treated as dormant lines of credit, which has special implications in the world of lending. The bottom line is that you have to be absolutely sure that you’re going to use a card to its full potential before going for it. If not, it might be best to put it off and look for another deal. After all, you don’t have to get every single type of credit card that you come across!

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