How to Keep Your Credit Card Balances Low
Learning how to keep your credit card balances low is one of the first steps to managing your credit score responsibly. That is because there are many temptations and many opportunities to run that balance up as high as it will go. However, if you do this, you're not going to be making the most of the opportunity that you have been given. That's because credit card companies frown on the fact that their customers use every last penny of credit that they have been extended. This tells them that you are not a responsible customer and that you should probably be denied for any future credit increase requests.
Following a Purchasing System
However, if you set up a purchasing system with your spouse or other family members who may be on the same account, you can be much smarter with the transactions you choose to complete. Usually, you don't want to have more than a third of your credit line used at any one time. Certainly don't use over half if you want to maintain the great score you have had to date. Once you reach that point where you're actually using half of your credit line, then you need to pay it off.
By doing so in regular intervals, you establish a payment record with those companies and they can see that you do have a financial plan and you are able to stick to it. Even though it might be convenient to pay this off in one fell swoop, that's often not recommended. That doesn't really tell the credit card provider that you know how to stick to a payment plan on a regular basis and make sure it's on time.
Setting a Transaction Value Limit
Find out from the credit card companies if you can place a transaction value limit on your card to prevent fraud. This is something that will also deter you from making large purchases that could max out your credit line. Certainly, there is an override system you can use by calling the credit card company directly, but this is on a case-by-case basis. Make sure you evaluate whether or not you really need something versus the fact that you just want to own it. Sometimes, people get caught up in the moment and they end up purchasing something that they regret as soon as they get home. This buyer's remorse can sometimes turn into a return trip to the store or just keeping the item and feeling guilty when you finally use it.
If you want to avoid this, then take a couple days to really consider a purchase before you go back and buy it. Figure out how often you would use it and what kind of return you would get on that investment. By approaching each potential large transaction with this train of thought, you'll be less likely to make those spur of the moment choices that can get you in a lot of financial trouble.
The knowledge of how to keep your credit card balances low may seem like common sense, but sometimes people who aren't familiar with using credit at all may be completely unfamiliar with them. This is why there are so many consumer education sources that are now helping clients understand how best to use these credit lines. By taking these free classes, you'll also feel more confident about how you choose to use credit and where you use at. It all makes a difference in your overall credit score.
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State Guides to Credit Card Laws
- North Carolina
- West Virginia