Are you ready to master the plastic and save thousands of dollars? Will you finally figure out what all the hype on responsible credit card use is all about?
At the beginning of the week I shared an extensive piece on how you can master the plastic in your wallet. Today is time for part two.
Let’s continue on with how you can use credit cards to your advantage.
Pay off your monthly credit card balance.
This goes without saying. You have to pay off your monthly balance. I’m going to assume that your goal is to pay off your balance.
We all want to make good decisions. Real life just gets in the way sometimes. Nobody gets a credit card with the plan to not pay it off. Nobody plans on getting into massive amounts of debt with a credit card.
We have the best of intentions but we don’t always go by our best judgment.
What will happen if you don’t pay off your monthly balance or if you flat out miss a payment? What are the consequences of missing a credit card payment?
- Your credit score can go down 100 points.
- You can get charged a late fee of over $20 at least.
- Your APR can get increased to a ridiculously high rate.
What if I miss a payment by accident?
My advice is that you try to make your payment ASAP. When you do make the payment I urge you to call your credit card company to speak with a customer service rep. You need to ensure that this late payment won’t be reported to the credit bureau. Once the late payment is reported it’ll affect your credit score. I advise that you beg and plea so that they don’t report this late payment.
If the late payment has already been reported, you’re going to have to go on the defensive and suck it up. This means that you better not miss a payment again. Moving forward things should go back to normal if you make all of your other payments on time. It won’t be a permanent setback. It’ll just be a kick in the butt. We all need a kick in the rear to wake us up sometimes.
Take advantage of credit card rewards.
Yes there are rewards to using a credit card. I already touched upon this earlier and will dig into a bit further later on.
The types of rewards that you can take advantage of all will depend on the credit card that you sign up for. With my cash back rewards credit card I get a few hundred dollars reimbursed at the end of every year. My mom recently took advantage of her rewards card to order a free digital camera (well as free as it gets). There are many different rewards options. It’s important that you get rewards that matter to you.
I really can’t go much further right here because I’m not sure what rewards are offered to you and what you care about.
Avoid doing the following credit card killers.
We all make mistakes when it comes to our money. The amazing part is that you invested your money into this right here so that you can learn from my mistakes.
There are two moves you really need to avoid doing while trying to build your credit:
- Closing accounts. If you plan on making any huge purchases (car or home) in the near future, you need to avoid closing any credit card accounts. Closing accounts has a negative impact on your credit score. Your credit score will go down and you’ll be given a higher interest rate when you go for that loan. Closing a credit card account is also a poor short-term strategy that doesn’t address a negative behaviour. If you can’t resist yourself from buying the newest iPad with your credit card, maybe you have other problems.
- Playing the zero percent transfer game. This is simply too complicating and usually not worth the hassle. The rates are usually introductory offers and you’re back to normal after a few months. There are also conditions that will confuse the hell out of you.
This is a linear process that will take time. There really are no shortcuts. It’s kind of like getting in shape. You just need to do the right things consistently for a decent period of time.
The best part is that you won’t even notice yourself making these smart financial moves because everything will be automated and running on auto-pilot. This means that you’ll be building your credit score while being a master with the plastic.
So for the 99th time, a higher credit score will lead to a lower interest rate on loans in the future. This means more money in your pocket. It’s a pretty sweet setup if you asked me.
[Martin’s note: I’m sharing pieces from my premium guide, Completely Conquer Credit. You can grab the guide for only $7 now for a limited time if you enjoy the material.]