When used correctly, credit cards can actually make great financial sense. First, they provide great fraud protection in that you don’t have to worry about your bank account getting wiped out if you were to use your debit card. Next, and probably the best reason to use a credit card in general, and for all purchases, are the rewards that come along with it. By using the card on purchases, you would have made anyways, you can earn miles, points or dollars back, so you can ignore some of the myths out there.
Close the Account When It Reaches $0
Debt can be a scary thing, so much in fact that if you find yourself in debt it could take years until you are finally free. Once you see that zero balance it can be a huge weight off your shoulders. In order to resist temptation of charging up the balance again your first reaction might be to close the account right away. This actually can hurt your credit score because you are removing that available credit, so if you have debt on other cards it can lower your score. You can actually help yourself by keeping the card open, but cutting it up so you don’t use it.
Paying the Minimum is Enough
When you receive your statement where you see the due date there will be a minimum amount that you need to pay by then to keep your account in good standing. While, yes, that will satisfy the minimum until the next statement, but paying the minimum will leave a balance on your account, making you responsible for interest going forward, which depending on the balance and APR on your card, can be quite significant.
Carrying a Balance Helps Your Credit Score
Speaking of a balance on your credit card, some may think that charging and keeping a balance on your card will be good for your credit score. While charging and paying off each month can be good to the creditor to show a solid payment history and responsible use so they can increase your limit, carrying a balance does nothing to help your score. In fact, carrying a balance will hurt your score as it lowers your entire credit utilization, so it’s always best to keep a balance towards zero, while your available credit as high as you can.
A Credit Line Increase Will Hurt
As you do have a solid history with your creditor they will try and reward you with a credit line increase that is your choice to accept. Some may think this will hurt your score, but actually it will not lower your score by reviewing your account, and can actually improve your credit score because it will increase the total available credit and lower your overall credit utilization. Since there is no harm you might as well accept the credit line increase, but it will make it all the more reason to stay disciplined not to go on a spending spree.