Finder estimates that 62.8 million credit cards were issued to people in the UK as of January 2021. Many of these credit card holders would agree that it is one of the best things to happen to their financial life. With a credit card, you can shop now and pay later and enjoy the convenience of using it in many shops worldwide since it is a well-known mode of payment. However, being a credit card holder comes with several responsibilities to be aware of in addition to the perks. Below are some of the best habits you should adopt to be a responsible credit card holder.
- Stay within your credit limit
Recent Bank of England figures show that UK consumers are currently borrowing £1.5 billion monthly on their credit cards. Like most people, you have likely taken full advantage of your credit card and spent to its maximum limit. It is surprising that many credit card providers indirectly encourage consumers to use their credit card limit because this is a huge mistake in reality. Maxing out your credit card doesn’t increase your benefits but rather enlarges your monthly payment. Consequently, maxing out your credit card is more of a sign that you are not in control of your finances as well as you thought than it is a sign of you getting ahead financially. If possible, restrict your credit utilization to around 30%, but remember that lower is always better.
- Beware of interest and debt
Credit card interest rates are notably high even in our historically low-rate environment. Consequently, if you only pay the minimum amount on your credit card and carry a balance from month to month, your high-interest charges will quickly add up and result in long-lasting debts. Debt on your credit card balance is bad because every purchase you make will cost significantly more. In addition, you may even end up erasing the value from any earned rewards. Consequently, avoid credit card interest and debt by using your card for planned purchases only. If you are already stuck in a cycle of paying the minimum monthly payments but never clearing the outstanding balance, you can get assistance from experts who help with types of debt such as credit cards and loans.
- Pay bills on time
It is common knowledge that payment history is one of the most crucial factors regarding credit scores. As such, paying your credit card bills on time is vital to avoid serious consequences like expensive late fees and interest rate increases. You can even go into collections if you delay your credit card payments, which can be a source of significant stress. Also, remember that the longer you take to catch up on payment, the more your credit score will plummet. Consequently, commit to paying your bills on time by setting up calendar reminders and email notifications, so you never forget due dates. You can also set up automatic payments to ensure payments are always made on time without your direct involvement.