Resource to Help You Learn to Use Credit Cards Wisely

Learn how to develop a healthy relationship with credit cards to avoid debt.

Millions of Americans have faced challenges with credit card debt, but credit cards themselves are not the enemy of good finance. If you learn how to use credit cards wisely, you can develop a good credit strategy that avoids debt problems while helping you build your way to a better credit score.

The resources in this section are all designed to teach you how to use credit cards wisely without abusing them. Once you have a better understanding of how credit cards work and how to use them strategically, you may decide you can keep them in your life instead of swearing them off for good. If you still have questions, Consolidated Credit’s financial coaches are here to help. Just click the Ask a Question button at the bottom of this page.

Good Credit Habits of Smart Spenders

Consolidated Credit explains how to have better credit habits while also saving money. Checking the benefits of a credit card and convenience helps with spending as well as not taking on too many cards while being smart about what and how you spend.

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Credit cards are a great financial tool when used correctly. But you have to be a Smart Spender when it comes to using credit the right way.

Smart Spenders aren’t going out to get credit just because they can. And they don’t treat credit like money that they don’t have to pay back. They understand that credit cards can be used for convenience, safety and tracking, but even credit cards used for the right reasons have to be used responsibly.

Smart Spenders aren’t constantly going out and signing up for new credit cards. Instead they only get new credit when they need it and shop around for the best cards for their needs. Instead of being lured in by advertising, they research credit cards carefully to ensure they’re not blindsided once the card is in use or that the rewards aren’t worth the interest and fees.

Smart Spenders aren’t using luck or crossing their fingers hoping that they get approved because they know exactly how creditors judge creditworthiness. They understand the three Cs – character, capital and capacity. They know they have to show they’re a responsible borrower who can and will repay what they borrow, with assets to back them up.

Once Smart Spenders find the right card for their needs, they take time to read through the contract carefully so they know what they’re really getting into. They know their credit limits, can strategically pay around the grace period, and know how to avoid penalties – and exactly what those penalties will be if the card is misused.

Even though credit card statements always come with a minimum payment requirement, Smart Spenders always pay more than the minimum – it’s a trap. They usually pay off everything in full on credit cards used that month. This way they always start the month with zero balances on their cards. When they can’t pay off a balance in full, they make a plan to pay it off as fast as possible, and know how to read statements to find balance payoff information.

A credit card grace period is the amount of time you have to pay off a balance before interest charges are applied. A Smart Spender knows when the grace period ends in relation to each billing cycle so they can pay off the debt accrued that month before the interest charges are applied to minimize the cost of using credit.

Smart Spenders understand that just because a credit card company gives you a high credit limit, it doesn’t mean you should run up that debt. Smart Spenders check two metrics often: how much they can afford to borrow and what they can comfortably pay to eliminate debt each month. They check how much they can borrow by setting a limit at 15% of their net annual income. And they also check how much they can afford to pay back each month by calculating 10% of their net monthly income. This helps ensure Smart Spenders have enough money for bills, expenses like groceries, and even savings.

One of the biggest downsides to using credit is it makes it really easy to give into impulse buys when you see something you want in a store. Smart Spenders resist the temptation and only buy things when they need them after taking time to shop around for the best price. They may even think about it a few days before deciding to buy something to make sure they really have to have it. They also avoid other bad habits, like using credit to cover budget gaps, leaving balances to accrue interest month after month and using one credit card to pay another.

Now you know these eight credit habits to make you a Smart Spender, too!

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Good Credit Habits of Smart Spenders

Consolidated Credit explains how to have better credit habits while also saving money. Checking the benefits of a credit card and convenience helps with spending as well as not taking on too many cards while being smart about what and how you spend.

Credit cards are a great financial tool when used correctly. But you have to be a Smart Spender when it comes to using credit the right way.

Smart Spenders aren’t going out to get credit just because they can. And they don’t treat credit like money that they don’t have to pay back. They understand that credit cards can be used for convenience, safety and tracking, but even credit cards used for the right reasons have to be used responsibly.

Smart Spenders aren’t constantly going out and signing up for new credit cards. Instead they only get new credit when they need it and shop around for the best cards for their needs. Instead of being lured in by advertising, they research credit cards carefully to ensure they’re not blindsided once the card is in use or that the rewards aren’t worth the interest and fees.

Smart Spenders aren’t using luck or crossing their fingers hoping that they get approved because they know exactly how creditors judge creditworthiness. They understand the three Cs – character, capital and capacity. They know they have to show they’re a responsible borrower who can and will repay what they borrow, with assets to back them up.

Once Smart Spenders find the right card for their needs, they take time to read through the contract carefully so they know what they’re really getting into. They know their credit limits, can strategically pay around the grace period, and know how to avoid penalties – and exactly what those penalties will be if the card is misused.

Even though credit card statements always come with a minimum payment requirement, Smart Spenders always pay more than the minimum – it’s a trap. They usually pay off everything in full on credit cards used that month. This way they always start the month with zero balances on their cards. When they can’t pay off a balance in full, they make a plan to pay it off as fast as possible, and know how to read statements to find balance payoff information.

A credit card grace period is the amount of time you have to pay off a balance before interest charges are applied. A Smart Spender knows when the grace period ends in relation to each billing cycle so they can pay off the debt accrued that month before the interest charges are applied to minimize the cost of using credit.

Smart Spenders understand that just because a credit card company gives you a high credit limit, it doesn’t mean you should run up that debt. Smart Spenders check two metrics often: how much they can afford to borrow and what they can comfortably pay to eliminate debt each month. They check how much they can borrow by setting a limit at 15% of their net annual income. And they also check how much they can afford to pay back each month by calculating 10% of their net monthly income. This helps ensure Smart Spenders have enough money for bills, expenses like groceries, and even savings.

One of the biggest downsides to using credit is it makes it really easy to give into impulse buys when you see something you want in a store. Smart Spenders resist the temptation and only buy things when they need them after taking time to shop around for the best price. They may even think about it a few days before deciding to buy something to make sure they really have to have it. They also avoid other bad habits, like using credit to cover budget gaps, leaving balances to accrue interest month after month and using one credit card to pay another.

Now you know these eight credit habits to make you a Smart Spender, too!
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How to Compare Credit Cards

Consolidated Credit breaks down how to choose the right credit card for you. This includes the credit card company, benefits, and annual fees. It is also better to choose a major credit card, as they are likely to be accepted everywhere.

Credit cards vary greatly from one issuer to the next, so Smart Spenders know to compare them carefully before signing up. Here are the eight features that Smart Spenders know to check when comparing cards…

Rates can vary greatly and the difference of what items end up costing can be astounding. So Smart Spenders know how to shop for the lowest rate possible because it has a big financial impact.

Smart Spenders also know how to opt for credit cards that have no annual fees. Some credit cards can have annual fees up to $75!

There are credit cards that have special interest rates for things like balance transfers, and they may have additional transaction fees, too. That’s why Smart Spenders take note of transaction fees to see exactly how much it will cost to use the credit card for things like balance transfers.

It’s rare these days, but some credit cards and loans have a grace period – that’s time you have after the due date to pay without facing penalties. Of course Smart Spenders always pay on time and usually pay off balances in-full before interest charges are applied. They understand that paying off balances in-full every month can eliminate interest charges entirely!

Smart Spenders are aware of the financial and credit impact of credit limits. Not only does a high limit give a Smart Spender more purchasing power, but it also has an impact on the cardholder’s credit score. Current credit used versus total available credit is the second biggest factor in credit scoring.

Smart Spenders understand that cards are easier to use if they’re accepted everywhere. That means major credit cards are better bet in most cases than store credit cards. And even major cards may not be accepted everywhere in the world.

Smart Spenders check what services are included with certain cards. From fraud protection to credit score tracking, added services can offer benefits that go beyond basic usage.

Experienced Smart Spenders use reward credit cards because they can provide good reason to use one card over another. Smart Spenders check rewards programs and understand limitations and restrictions. They choose the card that offers the most rewards with the least complications.

Be a Smart Spender – shop around for credit cards and use comparison websites to your advantage. Once you find THE ONE, don’t rush into signing. Read and understand your contract and make sure to keep a copy on file.

For more information on how to be a smart spender, visit ConsolidatedCredit.org.
Using Credit Responsibly

Consolidated Credit explains how to deal with identity theft, such as being cautious. Reporting a stolen or missing card as well as not buying in impulse helps to alleviate any issues.

Smart Spenders know how to use credit responsibly. Here are eight tips to use credit without abusing it (or letting it abuse you).

Smart Spenders don’t run up debt just because they have credit available. They know how much debt they can afford and stay below that amount.

Smart Spenders take time to read each contract and loan agreement before they sign anything. They know how interest, fees, penalties and payments are applied so they don’t get hit by unexpected issues.

Smart Spenders don’t let debts linger, especially when they can be paid off quickly. They aim to pay off credit card balances in full every month or in as few billing cycles as possible. And they check terms to see if loans can be paid off early without a penalty.

Smart Spenders know it’s better not to hide from creditors is there’s ever a challenge paying back debt. They call lenders and creditors to make arrangements when issues arise, requesting a forbearance or temporary adjustment the payment schedule.

Smart Spenders don’t use credit cards as a license to spend. They always comparison shop before spending and shop with a list. So that means not buying on impulse because of flashy sales displays.

Smart Spenders are prompt about reporting lost or stolen cards. And if there’s a potential for identity theft they place fraud alerts with the credit bureaus.

Smart Spenders only give out credit information over the phone if they initiated the call or if they have verified the caller’s identity. Giving out information to the wrong people can lead to identity theft and fraud.

Smart Spenders only enter credit card information on trusted, secure websites. And they never enter credit card information after clicking on an unsolicited email that shows up in their inbox.

Those are just a few ways Smart Spenders use credit so it doesn’t cause problems. For more information on how to be a Smart Spender, visit ConsolidatedCredit.org!
Credit Tips to Live By

Consolidated Credit offers tips on how to properly handle credit. One of these factors is following a budget closely and keeping track of credit payments.

Smart Spenders always that credit – any type of credit – is a loan. It’s real money that you’re expected to repay.

Smart Spenders start small with one card that has a low credit limit. They use that card responsibly and make sure they can manage the debt before they being to consider applying for more credit.

Smart Spenders study credit card agreements and closely read the fine print on inserts that are enclosed with monthly bills. This is important because card issuers can change terms with 15 days’ notice and these inserts may explain changing rates or fees.

Smart Spenders know that only meeting the minimum required payments is a trap! If you pay off a $1,000 debt at an 18% APR using only minimum payments it will take 8 years – yes, EIGHT YEARS – to repay. And the total interest charged will be nearly equal to the original amount, so it almost doubles the cost.

Smart Spenders know one slip up can create a negative mark on your credit report that can stick around for seven years. And if you make two of these mistakes your interest rate can escalate to the maximum until you make six consecutive payments on time.

Smart Spenders follow their budget diligently and keep track of exactly how much they’re paying towards their credit cards. They keep non-mortgage debt payments at less than 15% of their net monthly income. So if a Smart Spender takes home $4,000 per month they spend no more than $600 on debt payments, not including mortgages and auto payments.

Smart Spenders talk to their creditors and lenders whenever the need arises. Always notify issuers promptly when you move. And if you can’t make a payment you call them before you’re late, because Smart Spenders know creditors want your business for life. So they may be willing to make special arrangements that won’t leave a negative mark on your credit reports.

Smart Spenders take note of the first sign of debt trouble. So if they see they’re doing something like covering budget gaps with credit cards or using one credit card to pay another they take action. They find out how to get control of their finances and explore debt consolidation, low-interest lending options and credit counseling. They stop charging at the first sign of trouble. They put credit cards on lockdown until debt problems are taken care of and stability is achieved.

For more information on how to be a Smart Spender visit ConsolidatedCredit.org.