Tips to Become a Smart Credit Card User

Credit cards are an excellent tool for building credit and reinforcing sound financial habits. Depending on what card you use, they may also offer points, cash back, or miles on purchases in addition to other benefits.

If you want to take advantage of these benefits, it’s essential to understand how to use a credit card responsibly. Consider these smart tips to make the most out of your credit cards. 

Always try to pay your statement balance in full by the due date

You can avoid interest on your purchases by paying off your entire statement balance on or before the due date each month. Consider setting up daily or weekly alerts to keep track of your current balance. If you can’t afford to pay the entire balance, try paying more than the minimum amount due to keep your interest charges down.

Paying off your balance also can help keep your credit utilization down and improve your repayment history, both of which are key factors in improving creditworthiness.

Use credit cards to earn points, miles, or cash back on purchases for rewards

Some credit cards allow you to earn points on purchases that you can redeem for cash or other rewards. Rewards programs can vary by credit card and card issuer, and they may also involve partner retailers that offer deals at select merchants or locations, so make sure you know how a card’s rewards model works before you apply.

You may also find cards that allow you to earn miles on purchases. These miles can be redeemed for rewards through an airline’s loyalty program. Some cards may allow you to redeem points or miles on travel bookings, gift cards, online shopping with participating partners and for cash.

Lastly, some cards will offer cash back on purchases. These cards can work similarly to cards that earn points or miles.

Use balance transfer credit cards to consolidate debt

A balance transfer enables you to use a credit card to repay other outstanding debts by moving your balances onto a new card. Sometimes, a card will charge you a fee for this service, typically a minimum fee or a percentage of the amount transferred, whichever is greater. 

You can use a balance transfer credit card to repay a credit card or loan balance, and you can also use it to consolidate debt from multiple cards or loans to make your payments simpler and more convenient. Some credit cards also offer a low introductory APR on balance transfers to make paying the balances off easier. Paying down as much of the balance as you can during the offer period is important. Once it ends, standard interest rates on balance transfers apply. 

Avoid closing your credit cards

Canceling a credit card can lower your available credit and cause your credit utilization to rise. For example, if you have five credit cards with credit limits adding up to $10,000 and owe $3,500 across your cards, your current credit utilization for those cards is 35%. If you paid off a $200 balance on a card with a credit limit of $2,000, then closed that card account, you would have raised your credit utilization to 41.25%.   

Don’t max out your credit card limit

Maxing out your credit card increases your credit utilization and can hurt your creditworthiness. A good credit utilization ratio is typically under 30%.  This means using less than 30%  of your total available credit is an important factor in maintaining and improving your creditworthiness.

The higher your credit utilization, the more it can negatively impact your creditworthiness. If you must carry balances on your cards, try to keep the total balance of those cards under 30%.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.

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