Credit cards got you down?

Know how to use your credit cards. Credit is a basic need in today's society. A good credit score can save you money, get you a better interest rate on purchases and make you feel more confident about the money you have going in and out. I have a few simple and easy to follow tips to help you not only create but also maintain good credit.

If you must use a credit card, be smart about it-

Don't use it for large purchases, those interest fees on your carrying balances will bury the payments you are making with the interest. I used to work for a major credit card company. The required payment is always in the companies best interest and their best interest only!

Let's make this real:

Let's say that the minimum payment on a balancing owing of $5,000 is $110. And the interest rate for the credit card is 15.99% . At that rate the balance would take you almost 25 years to pay off and you will have paid $7,006 in interest alone. The extra interest paid into the card as well as the balance owing add up to a total of $19,018. 

Always pay off your balances-

As you can see from the example above it is important to pay the balance of your credit card off as quickly as possible. The more you have racked up on the account the more you are over paying for the use of the card. If you want more money in your pocket pay as much over as you can afford.

For example:(using the example above)

The minimum payment on a balancing owing of $5,000 is $110. And the interest rate for the credit card is 15.99% . If you could afford to make at least $25 over the minimum payment each month you will have paid the balance off quicker and also boosted your credit score as well. The balance will be paid off completely in approximately 9.25 years and the amount that would have been paid would have dropped by $7,522. The total owing including the credit card company receiving $3,248 lowers drastically to only $11,496. In the first scenario the credit balance owing is nearly 3 times the amount available on the credit card. In this scenario it's less than double the amount owing. 

Use your credit cards for small purchases-

Yes it sounds silly to just go buy a pair of socks and then pay it off the next month. However, what that shows to the credit card company is that you are not a credit risk. You can pay off your balance as well as use your card on a regular basis without being close to your limit every month. Obviously you don't need 12 pairs of socks every year, you just want to make sure it's all done in moderation and not excess.