Despite the fact that credit cards in the USA have been used for about 70 years and their enormous popularity, many people still do not know how to use them correctly in order not to make extra debts. This has a major impact on the growth of debt among Americans, which currently stands at more than $ 900 billion in credit cards, mainly due to incorrect balance management.
So, if you are interested in finding out how not to spend money on paying off extra debts, properly handling the balance of your credit card, read on this article that we prepared specifically for this.
Credit card balance
A credit card balance represents your debt or no debt to your credit card provider. If you have paid less than the arrears, it means that you have a positive balance. The balance can also be zero when you paid the entire amount of the debt, and negative when you paid more.
The balance gets paid for all your recent purchases made since the last debt repayment. Also, you are credited with the cost of annual service, if any, the possible fee for inactivity, when it is applied by the lender, if you do not use a credit card, and also penalties for late payment. At some point it may seem like credit cards are not worth using, but they are one of the most convenient and efficient tools for building a good loan for you.
In addition, if you know how to properly handle them and do so, then you can get with minimal losses, maximizing the benefits from their use. Let’s look at actions that will help you keep a balance.
Understand what is more important for your loan
Many credit card users think that having a balance is better reflected in their credit rating for the better, thanks to the lender’s profit. In fact, it is not. Of great importance are the active use of the card and the timely payment of card debt. Use the card regularly, paying purchases by it, do not create late payments and get a positive effect of the credit card on your credit.
Do not allow the transfer of debts on the card for the next month
Transferring the debt to the next month, you get the highest possible interest rate on the card. By paying interest without a loan, you still owe the creditor the amount of the initial debt. Therefore, by the end of each payment period, it is worth closing the credit card debt in full.
Pay more than minimum payment
If you do not have the opportunity to completely close the debt every month to pay a possible minimum payment, it may seem very attractive. But in reality this is not the best way out, since it will not be a debt repayment. Most likely this amount will be enough only to cover the annual interest rate, and all the remaining debt will be transferred to the next month, which will lead to additional interest in the next period.
Always pay on time
For the wrong payment, penalties can be as high as 38 US dollars. In addition, an overdue payment may result in a change in the interest rate in the direction of its increase, which will affect the increase in your credit card debt and a decrease in your credit score.
A significant reduction in your credit rating will most likely deprive you of the possibility of obtaining in the future larger financing for the purchase of a car or a house. Try not to spend more than you can afford to pay on time.
Pay debts on cards with higher interest rates first
If you have several active credit cards and you don’t have the opportunity to pay everything right away, then pay first of all those where the annual interest rate is higher. This will allow you to lose less money at an interest rate. In addition, be sure to try to pay at least the minimum payments for those credit cards where the interest rate is less.
Explore all the possibilities before applying for a credit card
If you have any questions or find it difficult to make a choice in favor of one of the proposals, our specialists will help you and provide you with full consultation so that you can make a choice in favor of the best offer.