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How to wisely use your Credit Cards
A credit card as we all know is a piece of plastic which is usually very handy these days. It is a thin plastic card, usually 3” by 2” inches in size, that contains information such as your name, signature that confirms your identity. A credit card proves your identity whenever you make a major purchase such as car. Credit cards have some terms associated with it such as annual fees, APRs, monthly balance, crdit limit and above all a good credit score. Now a days you are approved a new credit card only if you have good credit score. If you use your credit card wisely then you can enjoy its convenience without paying extra financial charges. Here are few tips on how to wisely use your credit cards:
- Keep more than one credit card:
IT was ok to keep only one credit card before recession. But now with economy not in place ,issuers have been closing accounts and reducing credit limits for card holders even for those who had excellent credit score. So having more than one credit card is important as other could be used as backup. - Your first credit card should be a rewards card:
Its always better to have first credit card as reward card so you can get upto 5% cash back on your routine purchases. Use your second credit card as backup in case of emergencies . Make sure the second credit card has low interest rates or low APR. You should use your credit card often for grocery or gas purchase to keep your second credit card account active. - Don’t open so many store credit cards: Store credit cards may attract you by offering promotions, sales, rewards, 0% financing and many other tempting deals. Some of them are worth signing up for but don’t sign up for more than 2-3 store cards. As you apply for a store credit card, it triggers an inquiry on your credit report and too many inquiries in short time period makes you look like a borrower and that may reduce your credit score by 20-30 points.
- Don’t miss even a single payment if you have stellar credit score:
If you have great credit score then missing one payment could lead you in trouble. It could reduce 90-110 points as compared to 70-80 points reduction for the ones with low credit score. Its always better if you sign up for automatic bill payment to avoid this hassle of missing payments. - You can ask for credit limit increase:
If you want your credit card limit to increase, then do it by requesting small amount rather than a huge lump. Make sure you are making regular payments, have good credit and actively using your card otherwise the issuer may reduce your limit or close down your account .
