Using credit can be convenient and even necessary at times. It allows you to make big purchases that you could otherwise not afford if you had to pay for them all at once. Using credit wisely means playing by the unwritten rules that your creditor may not always want you to know or at least freely reveal to you.
Just Ask
The credit business is highly competitive. Numerous banks and finance companies are bidding to provide you with credit card and other loan services. If you feel the interest rates you are being charged are too much, call your creditors and ask them to lower your rates. If you are charged hidden fees, call them and ask them to drop the charges. If they refuse, threaten to take your business elsewhere. As a consumer, us leverage to get better credit conditions.
Do Not Pay Minimum Amounts
When you receive your credit statement, usually you will find an item titled "minimum amount due." There are no rules that say you cannot pay more than this amount. Paying only the minimum maximizes the profits of your creditor, while costing you the most money. By paying off your credit early, you reduce the amount of interest you pay on loans or credit cards.
Cut Your Spending
If you are having trouble even making the minimum payment on your cards and other loans, it is time to stop spending and examine your budget. Using credit to maintain a certain standard of living is robbing your future to pay for your way of life today. At some point you will find you will be unable to meet your debt obligations unless you can find ways to live more cheaply.
Pay Off Your Balance Each Month
Using a credit card to make small purchases can be convenient. You do not have to write a check or go to the bank and get cash to make everyday transactions. While your creditor would prefer you keep a running balance that you pay interest on, if you pay off your card each month you can avoid paying interest while still enjoying the card's convenience.
Keep Your Balances Low
Most credit cards come with limits that establish how much money you can borrow from the lending company. Carrying high balances on your cards, however, can damage your credit rating even if you do not fall behind on your payments, according to CNN Money. Bad credit scores can cause your credit companies to charge you higher interest rates, so keeping your balances low can save money.
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