While financial management comes with many moving parts, the most impactful factor is using credit wisely. Payments towards a credit card balance reflect on your credit history. The better your record, the better your score. If you’ve ever needed to borrow money, you know how important a good score is.
So, how do we manage our accounts and continue using credit wisely? The answer is as simple as a few easy steps. You’re going to want to read each detail of this article. Ready to learn about credit, debt ratios, and interest rates? Continue reading to learn more.
Pay attention to interest rates
Credit card interest rates vary as much as night and day. Unfortunately, not everyone is aware. 40% of people don’t know the annual percentage rate on their primary card. Additionally, they end up paying double or triple their original borrowed balance. The very first step to managing your credit is to get rid of those high-interest fees. In light of recent inflation hikes, taking advantage of a balance transfer offer is the best way to go.
Keep your debt-to-income ratio low
When lenders consider a request for funding, they take a person’s debt-to-income ratio very seriously. They assess your overall debt total versus your income. It’s almost like a cushion for lenders to ensure that they can make their money back. If a person has all their credit cards maxed out and other outstanding loans, it’s less likely that they can afford to open another line of credit.
You can lower your debt-to-income ratio by paying down your balances. It may take time, but remember that long-term financial health is the goal. Every time you use credit rather than debit, you’re affecting the result of your accounts. Remember, using credit is not a bad thing. Moreover, you have to make sure it’s intentional and not spending on impulse.
Maximize your credit card rewards
Credit card perks can be worthwhile, but only if they align with your spending habits. Reviewing card options before opening the account will help you earn the most rewards. For instance, cashback rewards are great for reoccurring purchases such as gas or groceries. On the same token, cards with identity theft protection are universally beneficial. Take some time to see everything the card provides before signing up. And, once you have an account, don’t forget to utilize those perks.
Courses for using credit wisely
Achieva Credit Union has financial literacy courses that you can attend online for free. These classes include using credit wisely and the secret to understanding your credit score. To view a full list of class schedules, visit www.achievacu.com/events.
