Credit Card Rules to Live By

Although Americans are learning to depend on less credit card use is increasing during this time of the year due to seasonal purchases. Stay disciplined in your spending with these guidelines.

1. Don’t Max Out Your Cards. “It’s the biggest mistake,” says John Ulzheimer, president of consumer education for SmartCredit.com. “It’s almost as damaging to your credit score as making a late payment.” Maxing out your cards increases your credit utilization ratio (the amount you spend versus your line of credit). To maintain a high credit score you need a ratio of less than 30%–it’s part of the category that makes up nearly one-third of your score.

Even if you pay of your balance each month, the amount you charge still matters. Tat’s because card issuers typically report your usage to credit bureaus on a monthly basis—and since everyone is on diferent payment cycles, you can’t assume you will have had the chance to make a payment. If you apply for a mortgage or auto loan while temporarily carrying a big balance, the lender may see it.

2.Rotate Usage. Sorry, but locking cards in a drawer will not improve your fnances. You actually need to use them on a regular basis—at least once every six months—to keep accounts current. Let them collect dust and you run the risk of your bank canceling your card.

3. Tink Twice Before You Cancel. A card that is canceled—either by you or the issuer—can be bad for your score. It decreases your credit utilization ratio, says Beverly Harzog, credit card expert with Credit.com. A closed account also decreases the average age of your credit history, which is 15% of your score.

While there’s no ideal number of cards, most people stick with three to fve main cards like VISA®, MasterCard, or American Express. If you’re unhappy with a card—say, the annual fee is too high—it’s okay to replace it with a more advantageous one. (Swapping if for another card helps maintain your credit utilization ratio.) Just don’t get in the habit of opening and closing accounts.

4. Forgo Cash Advances. “Don’t use your credit card to get cash unless it’s a life-or-death situation,” Harzog says. A cash advance generally incurs a fee and also has no grace period— the issuer immediately starts charging a high interest rate on your transaction, she explains.

5. Automate Payments. Te most important thing you can do to maintain a healthy credit score is pay your bills on time. (Your payment history makes up 35% of your score.) Set up automatic payments from your checking account. Never let the due date slide.


UNITED POLES FEDERAL CREDIT UNION
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