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Credits cards, no doubt, give you purchasing power. You go on a shopping spree on your credit card and pay later on. But, once you get into a debt trap, you get into a vicious circle and then it becomes very difficult for you to get out of it.<br />
<br />
Most people know this fact in principle, but are unable to understand how things pan out. It is most common among youngsters who have just started with their jobs and get hands on credit cards.<br />
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The sound of swiping it and joy of using it online is amazing but one fine day you have to pay for what you spend.<br />
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And when you go beyond your means, you face an outstanding balance which becomes difficult to pay for months at the end!<br />
<br />
So avoid landing in the soup and follow these four tips to avoid the debt trap.<br />
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<strong>Buy what you can afford </strong><br />
<br />
The one cardinal mistake people make is they use their credit cards to purchase what they cannot afford in cash, thus overspending or going beyond their means. Think of your credit card as a temporary substitute to cash that you will have to shell out in the next billing cycle. The moment you think you can “manage” things later and make purchases beyond your affordability, you have stepped into unchartered territory. Very soon you will realize you have spent a lot and end up in a sea of debt.<br />
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<strong>Pay your balances each month</strong><br />
<br /> If you want to avoid getting into <keyword id="599972" type="UNKNOWN" weightage="20" keywordseo="credit-card-debt">credit card debt</keyword>, make sure you are making full payment of your outstanding balance every month. This way, you will never carry forward your balance to the next billing cycle, thus avoiding the ‘minimum amount to be paid’ trap. The reason we call it a trap is because by paying your minimum amount due each month, you are only paying off your interest component and other charges that do not reduce your outstanding balance substantially.<br />
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<strong>Don’t give your credit card to others </strong><br />
<br /> We understand ‘friends in need are friends indeed’ but do not be magnetos and hand over your credit card to a friend, especially one who is reckless with his/her finances. If your friend does not have a credit card, perhaps his/her CIBIL report is not so great and the bank did not think of him as creditworthy. He/she may promise to pay you back the funds immediately, but if he does not, it’s your credit that is at stake and you may be stuck in a debt trap for no fault of yours. Besides, it can do substantial damage to your <keyword id="2054234" type="UNKNOWN" weightage="20" keywordseo="CIBIL-Score">CIBIL score</keyword>.<br />
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<strong>Do not ever consider a cash advance on your credit card</strong><br />
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If you are thinking of taking a cash advance on your credit card, you have obviously not done the right thing! A cash advance may seem like a plausible and quick fix solution in emergency, but it is indeed the costliest credit. Cash advances on credit cards are charged as high as 35-50%. It is therefore a very high interest loan, much higher than any other loan product.<br />
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Also, do bear in mind that even if you pay fixed amounts as credit card repayments each month, your credit card issuer will first use your payments to offset your regular balance first and then apply the remainder of your payment for the repayment of your cash advance.<br />
This means your cash advance will continue to accrue a high rate of interest. Furthermore, if you miss even a single repayment, you will end up paying a hefty amount to your credit card company as a late payment fee.<br />
<br />
As you must have understood by now, your credit card is quite a lethal piece of plastic that can get you into a debt trap sooner than you can imagine!<br />
<br /> It can also destroy your CIBIL score. Using your card responsibly, to build a good <keyword id="88181" type="UNKNOWN" weightage="20" keywordseo="credit-history">credit history</keyword> that earns you a high CIBIL score.<br />
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(Rajiv Raj is the Director and Co-Founder of <a href="http://www.creditvidya.com/">www.creditvidya.com</a>)<br />
<br />
(Image: Thinkstock)<br />

These amazing tips will never let you fall into a credit card debt trap

<keyword id="6357120" type="General" weightage="20" keywordseo="paytm" source="Orion">Paytm</keyword> is a pioneer of QR-based and mobile payments and the <keyword id="1736801" type="General" weightage="20" keywordseo="paytm-app" source="Orion">Paytm app</keyword> has become a one-stop-shop for all kinds of <a href="https://paytm.com/credit-card-bill-payment?utm_source=BusinessInsider&amp;utm_medium=article&amp;utm_campaign=Credit-Card-Bills-payment">payments</a> online over the years. The platform allows users to shop online, make payments using UPI, book tickets, recharge mobile phones and much more. The platform that began India’s fintech revolution is more than just a general payments app today, and one of its most useful functions is in managing and paying <keyword id="133020" type="General" weightage="20" keywordseo="credit-card-bills" source="Orion">credit card bills</keyword>.<br /><br />Paying credit card bills on Paytm is simple, easy and functional. It can remind you when it’s time to pay, and can be used to pay multiple bills at the same time. Here are some reasons you should use the Paytm application to pay <a href="https://paytm.com/credit-card-bill-payment?utm_source=BusinessInsider&amp;utm_medium=article&amp;utm_campaign=Credit-Card-Bills-payment">credit card bills</a>.<br /><ul><li>The Paytm app makes credit card payments easy by allowing users to add multiple cards to the app and remember them.</li><li>By adding multiple cards, the app also allows users to pay for all the credit cards at the same time. The Paytm app allows you to pay your credit card bill for all banks across Visa, Mastercard, Rupay, American Express, and Diner card portfolios.</li><li>The app also provides rewards, cashback, and flexible payment methods for users to pay credit card bills.</li><li>While bank applications usually use NEFT or IMPS methods for bill payment, the Paytm app throws UPI into the mix.</li><li>The Paytm app also allows the user to set reminders for bill payments, so they don’t miss the due date.</li></ul><strong>How to make payments using Paytm app<br /></strong>If you don’t have a <a href="https://paytm.com/credit-card-bill-payment?utm_source=BusinessInsider&amp;utm_medium=article&amp;utm_campaign=Credit-Card-Bills-payment">Paytm </a>account, you need to download the app on your iOS or Android smartphone and create one. Once that is done, you can go to the ‘recharge &amp; bill payment’ section on the Paytm app and select the ‘<keyword id="1069333" type="General" weightage="20" keywordseo="credit-card-payment" source="Orion">credit card payment</keyword>’ option.<br /><br />The app will ask you to enter the credit card number when you make a payment the first time, but it can remember the card after that. With the Reserve Bank of India’s (RBI) new guidelines in place, the cards will be saved with Visa, Mastercard, or another card issuer, and Paytm won’t actually store the details on its own servers.<br /><br />Once the card number is entered, the user will need to click ‘proceed’, to allow the app to automatically detect the bill amount by contacting your bank. The next step is simply to select one of the payment modes — UPI, net banking, debit card, etc — and make the payment.<br /><br />A decade ago, people had to go to an ATM and drop a cheque to pay their credit card bills, but the Internet made that simpler. And now, apps like Paytm are making this process easier by bringing different cards and different payment methods to the same medium. Add features like late fee protection and reminders on top, and you have perhaps the best way to make credit card payments.<br /><em>Disclaimer: This article is generated and published by the Insider Studios team. You can get in touch with them on insiderstudios@businessinsider.in</em><br />

Paytm makes it easier to pay credit card bills – here are five reasons why you should be using it

<p><div class="KonaFilter image-container display-table"><div><div class="image"></div></div></div></p><ul class="summary-list"><li>According to a <a href="https://www.nerdwallet.com/blog/credit-card-data/consumer-credit-card-trends-study/">report by NerdWallet</a>, more than a quarter of Americans have made a late credit card payment. The report also found that delinquent credit card payments have increased 22% in the last four years.</li><li>Based on NerdWallet's analysis, those late payments amount to more than $3 billion in fees - not including interest charges from carrying a credit card balance.</li><li>Beyond costing you money, late credit card payments can lead to higher interest rates and can lower your <a href="https://www.businessinsider.com/how-to-improve-credit-score">credit score</a>.</li><li>There are several ways to avoid <a href="https://www.businessinsider.com/credit-card-late-payments-and-interest-rates-rise-2018-5">credit card late fees</a>, from enrolling in auto payments to choosing a credit card with no late fees to using a service like Mint to keep track of payment dates.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories.</a></li></ul><p>A <a href="https://www.nerdwallet.com/blog/credit-card-data/consumer-credit-card-trends-study/">recent report</a> by NerdWallet found that 26% of Americans have made a late credit card payment (30 days late or more) in 2019. By NerdWallet's calculations, that amounts to more than $3 billion in late fees alone. The report also found that delinquent credit card payments increased 22% from 2015 to 2019.</p><p>Even with the best of intentions, it's easy to miss a credit card payment date - especially if you have <a href="https://www.businessinsider.com/many-credit-cards-how-i-keep-track-of-them-all-2019-7">several credit cards</a> or are simply busy. You could also be charged a late fee even if you're fully aware of the credit card payment due date but aren't able to make the minimum payment amount.</p><p>But beyond costing you money in the form of late fees, late credit card payments can have adverse effects on your financial health.</p><h2>What happens when you make a late credit card payment</h2><p>When you don't submit a payment by your credit card bill due date, the following things can happen:</p><ul><li><strong>You'll be charged a late fee. </strong>This is a maximum of $25 for your first late payment, and up to $35 if you've had a late payment previously.</li><li><strong>You'll be charged interest on your outstanding balance, and your interest rate may increase. </strong>If you pay your credit card bill late, you could see a significant increase in your interest rate, meaning you'll pay even more on your outstanding balance.</li><li><strong>Your credit score could take a hit. </strong>Payment history accounts for 35% of your <a href="https://www.businessinsider.com/how-to-improve-credit-score">credit score</a>, so if your late payment is reported you could see this number decrease. </li><li><strong>It could be added to your credit report.</strong> A late payment could also end up on your <a href="https://www.businessinsider.com/how-to-get-free-credit-report-check-credit">credit report</a> and stay there for seven years. Your credit score and credit report are important snapshots of your financial health and your creditworthiness to potential lenders, so having any negative marks could come into play if you're looking to open new credit cards, get a mortgage, or more.</li></ul><p>A late credit card payment is obviously a ding on your financial record, but no matter why you ended up with a delinquent payment in the first place, there are ways to avoid this happening.</p><h2>How to avoid credit card late fees</h2><h3>Set up auto pay</h3><p>If you know you have enough funds in your bank account to cover your credit card payments, <a href="https://www.businessinsider.com/how-to-build-credit-with-a-credit-card-steps">setting up auto pay</a> is a surefire way to avoid missing a credit card payment. </p><h3>Call and ask for a one-time exception if it's your first late payment</h3><p>If you haven't missed a credit card payment before, the odds are good that the issuer will waive the fee if you call in and ask. I've had luck getting a late fee waived when I forgot to make a credit card payment on an account I rarely used. The sooner you call in, the more likely you are to have luck getting the fee waived - and remember to make the credit card payment immediately, too.</p><h3>Set payment reminders or use a budget tracker </h3><p>Most credit card issuers will send you emails to alert you to upcoming payment due dates, but you can take your own steps to ensure you don't miss a credit card payment due date. Set your own payment reminders on your calendar or phone, and consider using a service like <a href="https://www.mint.com/">Mint</a> from Intuit, which tracks your spending and payment dates across cards.</p><h3>If you need to carry a balance, use a credit card with a 0% APR offer</h3><p>In an ideal world, you'd never need to carry a credit card balance, but if part of the reason you're getting hit with credit card late fees is that you're not able to make the minimum payment or statement balance payment, a credit card with a 0% introductory APR offer can help you get back on your feet. </p><p>For example, the Citi Simplicity Card doesn't charge late fees, and it has a 0% intro APR on balance transfers for 21 months plus 0% intro APR on purchases for 12 months. There's also the <a href="https://www.discover.com/credit-cards/cash-back/it-card.html">Discover it® Cash Back</a> card, which has no late fee for your first late payment and a 0% intro APR offer on purchases and balance transfers for the first 14 months. And the soon-to-be-released <a href="https://www.businessinsider.com/apple-credit-card-has-no-late-fees-2019-3">Apple Card will waive late fees</a> altogether.</p><p><em>With these credit cards and any other cards you use, just remember that 0% intro APR and no-late-fee offers should be used to help you pay off and consolidate credit card debt. If you still carry a large balance by the time the introductory period ends, you'll be back to incurring high interest rates. </em></p><h3><a href="https://www.businessinsider.com/best-balance-transfer-credit-cards">Click here to learn about the best balance transfer credit cards of 2019 »</a></h3>

Credit card late fees are costing Americans more than $3 billion, but it's easy to avoid them

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Cavan Images/Getty Images</span></p></div><p></p></div></div></p><ul class="summary-list"><li><strong><a href="https://www.businessinsider.com/category/credit-cards">Credit cards</a> are a tool that can either work for you or work against you. </strong></li><li><strong>If you want to <a href="https://www.businessinsider.com/best-rewards-credit-cards">use a credit card to earn miles or points</a>, you should be paying off your credit card every month instead of carrying a balance.</strong></li><li><strong>If you're only making the minimum payment and finding that you can't make a dent in your credit card balance, you may want to consider cutting up the plastic. </strong></li><li><strong><a href="https://www.businessinsider.com/yourmoney?utm_source=bullet">Read more personal finance coverage.</a></strong></li></ul><p>Building credit is important, there is no arguing that. And getting miles or points on a credit card can be a fun way to earn a little something for the spending you're doing anyway. But, before you can enjoy <a href="https://www.businessinsider.com/best-credit-card-for-travel-rewards">those credit card miles</a>, you have to know how to manage your finances - and <em>especially</em> your credit.</p><p>Here are four signs that you should probably take a break from buying on credit:</p><h2>1. You're only making the minimum monthly payment</h2><p>If your <a href="https://www.businessinsider.com/millennials-paying-off-credit-card-debt-not-worried-2019-10">credit card balance is creeping up over time</a>, making only the minimum payment may just be the culprit.</p><p>In an ideal world, you're paying off your credit card balances in full, each month. That way, you'll avoid interest payments - and avoiding interest payments is critical, considering how quickly they can add up. Carrying a balance and <a href="https://www.businessinsider.com/paid-off-credit-card-debt-paying-more-than-minimum-2019-6">making only minimum payments</a> <em>ensures </em>you'll make interest payments on your credit card.</p><p>Perhaps more importantly, making only the minimum payment may be a signal that you are spending outside of your means. Don't forget, a credit card is essentially a small loan. If you find that you're not able to put a dent in your credit card balance, or that the balance is slowly growing over time, you may be spending more than you're earning. If this is so, it may be <a href="https://www.businessinsider.com/strategies-to-pay-off-credit-card-debt-fast">time to cut the too-easy access to credit</a>.</p><h2>2. You're missing payments</h2><p>When you miss payments or make late payments, no matter what the reason, you're going to be hit with a penalty. This is a fee charged in addition to the interest payments you'll make for holding a balance.</p><p>A missed payment fee is a stinging slap on the wrist and may be another indication that you're not ready for a credit card. Managing a credit card, <a href="https://www.businessinsider.com/how-many-credit-cards-should-i-have-rule">or multiple credit cards</a>, takes diligence. If you're not ready to take on the responsibility of credit card management, you should consider doing without. There's no shame in taking a break from credit cards as you work on <a href="https://www.businessinsider.com/how-to-manage-your-money-expert-budgeting-tips">overall financial management</a>.</p><h2>3. You already have high debt levels</h2><p>If you're already feeling overwhelmed by debt payments, such as <a href="https://www.businessinsider.com/student-loan-repayment-debt-snowball-make-loans-fair">student loans</a>, a <a href="https://www.businessinsider.com/how-to-buy-a-house-step-by-step-guide">mortgage</a>, or a car note, then you may want to avoid a scenario that lands you in even more debt. There is no perfect formula for this, but if the amount of debt you take on slowly expands over time, it's likely time for a pause. Same idea if you've got a history of overspending or have been known to rack up debt balances.</p><p>Credit cards are a financial tool; one that can be used to your advantage, or that can be used against you. It's up to you to make an active decision about which of these will apply in your case. Only open up a credit card if you are certain that you are able to use one responsibly and that it will not end up adding to an <a href="https://www.businessinsider.com/millennials-debt-stressed-generation-2019-10">already-overwhelming load of consumer debt</a>. </p><h2>4. You're unsure of your interest rate</h2><p>Credit cards companies are banking on the fact that you don't really know - or care - how credit cards charge you interest. A small charge here and there may not seem like much, but maintaining a balance over time will add up.</p><p>For the simplest way to get an idea of how much a credit card will charge you over the course of year, look to the advertised Annual Percentage Rate, or APR. A credit card's APR reflects both the interest rate charged on balances and any additional fees assessed throughout the year. Most credit cards calculate interest payments daily, but provide an APR to illustrate the associated costs stretched out over a year.</p><p>For example, carrying a $1,000 balance on a credit card charging a 17% APR for a year would theoretically cost you $170. Though this is a simplified example that doesn't account for changes to the balance throughout the year, it's a crystal-clear example of how insidious interest charges can be.</p><p>Also, a credit card may have multiple APRs. For example, a credit card could have a penalty APR that kicks into effect after a payment or two are missed, or different APRs for <a href="https://www.businessinsider.com/how-to-transfer-credit-card-balance-pay-debt">balance transfers</a> and new purchases. Depending on what you plan to use a card for, always know the APR you'll be charged.</p><p>Oh, and the best way to avoid making interest payments? You guessed it: Always pay off those balances in full, each month.</p><ul class="read-more-links"><li>More <a href="https://www.businessinsider.com/category/credit-cards">credit card</a> coverage</li><li><a href="https://www.businessinsider.com/best-airline-credit-card-comparison-delta-united-american">What's the best airline credit card?</a></li><li><a href="https://www.businessinsider.com/best-cash-back-credit-cards">The best cash-back credit cards</a></li><li><a href="https://www.businessinsider.com/southwest-credit-card-comparison-which-to-get">Southwest credit card review</a></li><li><a href="https://www.businessinsider.com/best-rewards-credit-cards">Best rewards credit cards</a></li></ul>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/escape-sinking-car-survival-skills-2017-4">Here's how to escape a flooding vehicle</a></h3>        <div>                    </div>    </div>

4 signs you probably shouldn't be using a credit card

<br /> From <keyword id="6357762" type="UNKNOWN" weightage="20" keywordseo="Online-shopping">online shopping</keyword> to paying restaurant bills to booking tickets, <keyword id="6387037" type="UNKNOWN" weightage="20" keywordseo="credit-cards">credit cards</keyword> have invaded all parts of our lives. While credit cards have made our wallets lighter by replacing cash, rising frauds related to them raises concern too. But what if the same gets stolen or somebody steals the information about it and misuse it?<br />
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Fret not! Here are seven easy ways to keep your credit card safe and secure to have a peace of mind.<br />
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<strong>Keep unused cards in a safe</strong><br />
These days, having a number of credit cards is not uncommon. But it’s best to leave those credit cards at home which you rarely use or have assigned for specific things like travel. This strategy would prove to be extremely advantageous in case you lose your wallet; you’d only have to get minimum number of cards replaced.<br />
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<strong>Choose secured websites for credit cards</strong><br /> Let’s admit we live in an age of ubiquitous online <keyword id="6368952" type="ORGANIZATION" weightage="20" keywordseo="shopping">shopping</keyword>. We shop everything, right from grocery to gadgets to home furnishing, online using our ‘dear credit cards’. While credit cards offer convenience, it’s crucial for you to ensure that you use them only on a secured website.<br />
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The address of the website uses ‘https’ rather than ‘http’ only. Also, the website should display the secured lock either at the bottom right corner or on the top in some browsers. Use a website that has solid encryption software. In order to avoid getting duped, never ever make use of public computers to shop online.<br />
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<strong>Sign your card</strong><br />
Another thing to pay attention is to sign at the back of your credit card as soon as you receive it. This will prevent somebody else from making use of your credit card in case it gets stolen.<br />
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<strong>Check your credit card statements </strong><br />
Another way to keep your credit cards safe is to keep a check on your credit card statements regularly. Any unfamiliar purchase and debits of small amounts could be a sign of a fraudulent activity. Besides, make sure your credit card bill arrives on time. A late arrival could be an indication of identity theft and should be immediately reported to the credit card issuer.<br />
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<strong>Be careful at an ATM  </strong> <br />
You need to be cautious at an ATM counter. Make sure there is no device attached to ATM slot as it could be a skimmer to capture your credit card information when you swipe it. If you notice the same, immediately alert the bank.<br />
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<strong>Keep an eye at the time of transaction</strong><br />
If a cashier takes too long for the transaction, there are high chances that your card might be getting scanned through skimming terminals to gather the information. Pay attention to the person who is using your card and take it back as soon as possible.<br />
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<strong>Buy identity theft insurance and card protection plans</strong><br />
Identity theft has become quite common these days. It means stealing somebody’s identity to obtain credit in his or her name. Some insurers like Tata AIG have come up with an identity theft and fraudulent charges insurance. It provides you coverage against any fraudulent charges made on your credit card by stealing your identity. You can also go for card protection plans offered by the likes of ICICI bank, HDFC bank, and Axis bank. If you register with them, you would be able to block all your lost cards with a single call. You would also get lost card replacement assistance. There are different membership plans to choose from, starting from Rs 1,399 to Rs 2,185.<br />
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Follow these simple tips and you would be able to safeguard yourself against credit card frauds. <br />
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<span>Rajiv Raj is the director and co-founder of</span><a href="http://www.creditvidya.com/">www.creditvidya.com</a><span>.</span><br />
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<em>Image: Getty Images</em><br />

7 Simple Steps To Prevent Credit Card Frauds & Misuse

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Maskot / Getty Images</span></p></div><p></p></div></div></p><ul class="summary-list"><li><strong>A well-managed <a href="https://www.businessinsider.com/best-rewards-credit-cards">credit card</a> can be an important step toward earning good <a href="https://www.businessinsider.com/how-to-increase-your-credit-score-improve-credit">credit scores</a>.</strong></li><li><strong>When you make credit card mistakes, however, those same accounts can set you back and potentially hurt your credit scores.</strong></li><li><strong>You should avoid carrying high balances and paying late if you want your credit cards to help you instead of causing credit problems, and a</strong><strong>voiding credit cards all together is not a solution.</strong></li><li><strong><a href="https://www.businessinsider.com/yourmoney?utm_source=bullet">Read more personal finance coverage.</a></strong></li></ul><p>A <a href="https://www.businessinsider.com/best-no-fee-credit-card">credit card</a> is a tool that can <a href="https://www.businessinsider.com/signs-you-should-be-using-credit-card">make your life a lot easier</a>. Making purchases can be more convenient, safer, and more rewarding all courtesy of the little pieces of plastic you carry around in your wallet.</p><p>But there's another side to the story. Many people make mistakes when it comes to their credit cards - sometimes big ones.</p><p>Credit card mistakes can be costly. Not only can a poorly managed credit card result in a lot of wasted money, but it could snowball into a bigger problem by damaging your <a href="https://www.businessinsider.com/what-is-a-good-credit-score">credit scores</a>.</p><p>Below you'll find three of the biggest mistakes people make when it comes to credit cards.</p><h2>Mistake No. 1: Carrying a balance</h2><h3>Carrying a balance could cost you money</h3><p>You probably won't be surprised to read that rolling an outstanding balance from one month to the next can cost you extra money in interest fees. Credit card interest is notoriously high compared with other forms of debt. If you repeat this habit month after month those interest fees could add up to a significant amount over time.</p><p>Let's say you have a credit card with a $5,000 balance and an APR of 17% (slightly lower than the current average credit card interest rate of 17.54%, <a href="https://www.creditcards.com/credit-card-news/rate-report.php">according to CreditCards.com</a>). If you were to make only the minimum payment on that card (around $120 per month), here's what the decision would cost you, according to <a href="https://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx">Bankrate's credit card interest calculator</a>.</p><ul><li>It would take you a little <strong>over 22 and a half years to pay off your debt</strong>.</li><li>You'd pay an <strong>extra $6,524 in interest</strong>, assuming you stopped using the card for additional purchases.</li></ul><p>Paying solely the minimum payment is an extreme example. Hopefully that's not a mistake you're currently making. However, the truth is that carrying any type of balance from month to month is a misstep when it comes to credit cards.</p><h3>Carrying a balance could lead to credit score damage</h3><p>Not only can rolling a balance on your credit cards be expensive in the short term, it can lead to potentially bigger problems as well. When you carry an outstanding balance on your credit cards it may increase your credit utilization ratio (also known as your balance-to-limit ratio). An increase in this number isn't good for your credit score.</p><p>Credit scoring models, <a href="https://www.businessinsider.com/what-is-a-fico-score-how-is-it-calculated">like FICO</a> and VantageScore, pay attention to how much of your credit limit is being used on credit card accounts. When your credit report shows that you're using a bigger percentage of your overall credit limit on a revolving credit card account, you represent a higher credit risk to lenders. Your credit scores may go down as a result.</p><p>The good news is that you can often regain any "lost" credit score points by paying down your credit card balances again. Once the new, lower balance (and subsequently lower credit utilization ratio) is updated on your credit report, your score will likely start to rebound.</p><h2>Mistake No. 2: Paying late</h2><h3><a href="https://www.businessinsider.com/how-to-avoid-late-credit-card-payment-fees">Paying late could cost you money</a></h3><p>If you miss the due date on your credit card statement, many card issuers will tack on a late fee to your bill. For your first late payment, that fee can be up to $25. Any additional late fees can be as high as $35 each.</p><p>But a late fee might be only the beginning of your problems. When you fall behind on your payments there's also a chance your card issuer could opt to increase your interest rate, both on future charges and your existing balance.</p><h3>Paying late could hurt your credit score</h3><p>Perhaps even worse than the immediate expense of late payments is the potential for credit score damage. Your payment history influences 35% of your FICO Score. When you pay your credit card bill more than 30 days past the due date, you may be at risk for serious credit score damage.</p><p>If late payments show up on your credit reports and harm your scores, you might have issues qualifying for future financing, depending upon the severity of the credit damage. Also, even if you <a href="https://www.businessinsider.com/how-to-get-a-loan">qualify for new loans</a> or credit cards, a lower credit score could mean that you'll pay more when you need to borrow.</p><p>If you're already struggling with credit damage from late payments, you can take some comfort in the fact that negative marks can't stay on your credit reports forever. The <a href="https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf">Fair Credit Reporting Act</a> requires late payments to be removed from your credit reports after seven years.</p><p>Also, <em>recent</em> late payments are a bigger deal where your credit scores are concerned. That's good news because it means if you keep future payments on time, those old late payments will impact your credit scores less and less as time passes.</p><h2>Mistake No. 3: Avoiding credit cards all together</h2><p>The final mistake you want to watch out for is avoiding credit cards all together. If you've had a bad experience with credit cards in the past, it's easy to understand why you might be hesitant to try again. But swearing off credit cards is a mistake that could hold you back. When you avoid credit cards, you miss out on the opportunity to use those accounts to build a better credit rating.</p><p>When you <a href="https://www.businessinsider.com/how-to-open-more-credit-cards">open and use a credit card</a> the right way, it has the potential to help you build better credit scores for the future. Good credit can be a valuable asset anytime you need to borrow money. Good credit can even save you money when you apply for insurance coverage or new utility accounts.</p><p>Is it possible to establish credit without opening a credit card account? Yes, it's possible. You can open installment accounts, like a credit builder loan with Credit Strong or Self Lender, and pay them on time.</p><p>However, credit scoring models do consider the mix of account types that appear on your credit reports. (Credit mix is worth <a href="https://www.myfico.com/resources/credit-education/credit-scores/credit-mix">10% of your FICO Score</a>.) By adding revolving credit cards to your reports, there's often a potential to improve your credit more.</p><p>Credit cards can be intimidating for many people, but they don't have to be. In reality, it's no more difficult to manage a credit card properly than it is to manage the money in your bank account.</p><p>Remember, you're in control when it comes to your credit cards. If you use them wisely, they can make your life more convenient. Even better, a well-managed credit card may help you to establish better credit and potentially give you a chance tap into some attractive rewards for purchases you needed to make anyway.</p><ul class="read-more-links"><li>More <a href="https://www.businessinsider.com/category/credit-cards">credit card</a> coverage</li><li><a href="https://www.businessinsider.com/best-airline-credit-card-comparison-delta-united-american">What's the best airline credit card?</a></li><li><a href="https://www.businessinsider.com/best-cash-back-credit-cards">The best cash-back credit cards</a></li><li><a href="https://www.businessinsider.com/southwest-credit-card-comparison-which-to-get">Southwest credit card review</a></li><li><a href="https://www.businessinsider.com/best-rewards-credit-cards">Best rewards credit cards</a></li></ul>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/elon-musk-mars-starship-spacex-starhopper-rocket-moon-2019-6">Elon Musk's multibillion-dollar Starship rocket could one day take people to the moon and Mars</a></h3>        <div>                    </div>    </div>

The 3 biggest mistakes even smart people make with credit cards

<br />
	The first month of 2016 is about to get over and its time to look back and analyse your financial behaviour.<br />
	 <br />
	“Advent of 2016 signals new hopes and aspirations along with resolutions for fulfilling these aspirations. Here are 7 resolutions you must commit to if you want to enjoy credit happiness and <a href="http://www.businessinsider.in/Is-this-what-2016-holds-for-startups-in-India/articleshow/50549936.cms">easy access to finance</a> in the New Year by maintaining a healthy credit report and high credit score,” says Harshala Chandorkar, COO, <keyword id="6380215" type="ORGANIZATION" weightage="20" keywordseo="CIBIL">CIBIL</keyword>.<br />
	 <br />
	<strong>Timely payment of loans</strong><br />
	 <br />
	Ensure that you are paying of your EMIs and credit card bills on time. Always have enough balance in the bank in order to make timely disbursements.<br />
	 <br />
	“In case you are making payments through cheque each month ensure that the check is deposited in advance before the due date of the EMI payment. Similarly also make sure that you pay credit card bills on time each month. Try to make the credit card bill payments in full each month to avoid accumulation of debt and interest charges,” says Chandorkar.  <br />
	 <br />
	If making full payments isn’t possible, it is suggested that one should at least make part payments in order to avoid default tag. “Missing any EMI or credit card bill payment will impact your credit report and lower your credit score,” she notes.<br />
	 <br />
	<strong>Restrict credit card limits:</strong><br />
	 <br /> “While increased spending on your credit cards may not necessarily negatively affect your <keyword id="728709" type="ORGANIZATION" weightage="20" keywordseo="CIBIL-TransUnion-Score">CIBIL TransUnion Score</keyword>, an increase in the current balance on the card over time is an indication of an increased repayment burden and may negatively impact your score. It’s always prudent to not use too much credit,” says Chandorkar.<br />
	 <br />
	<strong>Limit credit exposure</strong><br />
	 <br />
	“The total size of your debt reflects on your <a href="http://www.businessinsider.in/Wanteasy-access-to-credit-for-your-startup-Here-are-a-few-tips-/articleshow/50743156.cms">credit</a> report and has an impact on your CIBIL TransUnion Score. Having many loans or credit cards increases the total amount of debt you owe and increases your credit exposure. High credit exposure may impact your CIBIL TransUnion Score.  If you have many loans running ensure that you close some of them so that your total credit exposure is reduced, before you apply for new loans,” she adds.<br />
	 <br />
	<strong>Monitor your co-signed, joint accounts</strong><br />
	 <br />
	It is important to regularly monitor all your loan accounts which include co-signed, joint and the ones for which you have signed up as a guarantor. It is also important to understand that by pledging as a guarantor on the loan, you are also legally responsible towards the timely repayment of the loan. In case of defaults and delinquencies by the principal borrower, the CIBIL TransUnion Score of the guarantor will also get negatively impacted. Hence, it’s imperative that the guarantor on the loan should ensure that the borrower pays the EMIs regularly on the due date, month on month.<br />
	 <br />
	<strong>Know your CIBIL TransUnion Score</strong><br />
	 <br /> It is important to keep a tab on your <keyword id="88181" type="UNKNOWN" weightage="20" keywordseo="credit-history">credit history</keyword> regularly in order to track your financial standing and be “loan ready” always. Remember responsible credit behavior is the cornerstone of financial independence. In order to enjoy financial freedom and access to credit you must ensure responsible credit behavior and due diligence.<br />

4 credit management resolutions that you must make in this new year!

<ul class="summary-list"><li><strong>The average credit card interest rate rose to a record high late last year. </strong></li><li><strong>It comes as more Americans are taking on credit card debt and making late payments.</strong></li></ul><p>Americans are taking on more <a href="https://www.businessinsider.com/recession-could-hurt-gen-z-finances-getting-worse-debt-inflation-2022-11">credit card debt</a> at the fastest pace in decades, and those left with balances at the end of this month could be <a href="https://www.businessinsider.com/credit-card-issue-rates-will-soar-2023-1">forced to pay a higher interest rate than ever before</a>. </p><p>The average interest rate on bank-issued credit cards reached 19.1% late in 2022, according to a <a href="https://www.federalreserve.gov/releases/g19/current/">Federal Reserve consumer credit report</a> released Monday, marking the <a href="https://www.axios.com/2023/01/11/credit-card-interest-rates-hit-record-high">highest rate</a> since the government began tracking this data in the 1970s. It surpassed the previous high of 18.9% in 1985 and could soon shoot even higher, with some experts predicting a <a href="https://www.businessinsider.com/credit-card-issue-rates-will-soar-2023-1">20% average rate this year</a> as the <a href="https://www.businessinsider.com/did-fed-hike-interest-rates-december-increases-slow-inflation-cools-2022-12">Federal Reserve continues to raise interest rates</a> to bring down inflation. </p><p>While some credit cards have a <a href="https://www.businessinsider.com/personal-finance/average-credit-card-interest-rate">standard interest rate</a> for all customers, most offer a range that <a href="https://www.businessinsider.com/personal-finance/average-credit-card-interest-rate#:~:text=Lenders%20use%20them%20to%20evaluate,with%200%25%20introductory%20interest%20rates.">largely depends on an individual's credit score</a>. </p><p>"Credit card rates reached record highs in 2022, and there is still more to come in 2023," Greg McBride, chief financial analyst at Bankrate, <a href="https://www.bankrate.com/finance/credit-cards/credit-card-rates-forecast/#:~:text=The%20year%20closed%20with%20the,household%20budgets%2C%E2%80%9D%20McBride%20says.">said in a blog post</a>. "An active Fed means cardholders with balances will continue to see interest costs rising."</p><p>During the height of the pandemic, households accumulated roughly $2.5 trillion in <a href="https://www.businessinsider.com/us-households-could-burn-through-savings-within-months-2022-6">excess savings</a> as stimulus checks rolled in and lockdowns gave Americans fewer opportunities to spend their money. Over the past year, however, <a href="https://www.businessinsider.com/inflation-cooling-cpi-report-october-price-growth-2022-11">inflation</a> has caused Americans to spend more and save less, and their <a href="https://fred.stlouisfed.org/series/PSAVERT">personal savings rate</a> has plummeted to near-record lows as a result. </p><p>While both <a href="https://www.businessinsider.com/recession-could-hurt-gen-z-finances-getting-worse-debt-inflation-2022-11">credit card debt and late payments</a> remain below pre-pandemic levels, there's been a rise in recent months. </p><p>US credit card debt rose $38 billion between July and September of this year, per the <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20221115">New York Fed</a>, the largest percentage increase in over 20 years. The percentage of credit card payments 90 days or more past due rose to 3.7% in the third quarter, up from 3.2% the year prior. The <a href="https://www.businessinsider.com/recession-could-hurt-gen-z-finances-getting-worse-debt-inflation-2022-11">largest increase in missed payments</a> came from 18 to 29-year-olds, whose 90-plus day delinquency rate rose to over 6%. </p><p>"Is this simply a reversion to earlier levels," the New York Fed researchers wrote in a <a href="https://libertystreeteconomics.newyorkfed.org/2022/11/balances-are-on-the-rise-so-who-is-taking-on-more-credit-card-debt/">November blog post</a> regarding  the rise in missed payments, "with forbearances ending and stimulus savings drying up, or is this a sign of trouble ahead?"</p><p>For those that can't find a way to cut down their credit card debt, a <a href="https://www.businessinsider.com/personal-finance/best-balance-transfer-credit-cards">0% balance transfer credit card</a> could be one option, Bankrate Senior Industry Analyst Ted Rossman <a href="https://www.abcactionnews.com/news/local-news/credit-card-interest-rates-hit-record-high-in-2022#:~:text=According%20to%20Bankrate.com%2C%20the,increasing%203.12%25%20since%20January%201.">told ABC Action News</a>.</p><p>"All of those have 0% interest terms for up to 21 months," he said. "So you take your existing high cost credit card debt, move it over to this new card. By avoiding interest for almost two years, you could save hundreds, maybe thousands of dollars depending on how much you owe and how you use the card."</p><p>For now, the <a href="https://www.businessinsider.com/december-jobs-report-labor-market-payrolls-unemployment-rate-2023-1">US unemployment rate</a> remains near the lowest level in decades. But if the <a href="https://markets.businessinsider.com/news/stocks/recession-warning-economic-outlook-inverted-yield-curve-fed-rate-hike-2023-1">economy enters a recession</a> and jobless claims spike, many Americans could have an even harder time avoiding high interest payments on their credit card debt. </p>

The interest rate on your credit card balance could be the highest in history right now

<p><div class="KonaFilter image-container display-table"><div><div class="image"></div></div></div></p><ul class="summary-list"><li>Your <a href="https://www.businessinsider.com/what-is-a-good-credit-score">credit score</a> may go down after paying off a loan or credit-card balance.</li><li>When you pay off an old loan and the account closes, the average age of your active accounts could drop, which has a moderate impact on your <a href="https://www.businessinsider.com/category/credit-score">credit score</a>.</li><li>When you pay off a credit-card balance, avoid <a href="https://www.businessinsider.com/why-you-should-not-cancel-a-credit-card">canceling the credit card</a> all together, because that can also affect the length of your credit history.</li><li>Ultimately, the long-term benefit of paying off debt outweighs any chance of a temporary hit to your credit score.</li><li><strong><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</strong></li></ul><p>Finally <a href="https://www.businessinsider.com/how-to-pay-off-debt-fast-strategy">paying off debt</a> that you've been chipping away at for months or even years feels really good.</p><p>But if you've ever been there, you know that wiping out a loan or big credit-card balance can temporarily lower your credit score. It seems like a cruel trick - after all, isn't debt the mortal enemy of <a href="https://www.businessinsider.com/what-is-an-excellent-credit-score">excellent credit</a>? It is, but there are a few more important factors in the mix.</p><p>While we don't know<span> </span>exactly<span> </span>how credit scores are calculated, the big credit-scoring agencies <a href="https://www.experian.com/blogs/ask-experian/the-difference-between-vantage-scores-and-fico-scores/">generally place importance</a> on the same five factors. According to <a href="https://blog.myfico.com/5-factors-determine-fico-score/">FICO</a>, here's the breakdown:</p><ul><li>35% payment history</li><li>30% current debt balances</li><li>15% length of credit history</li><li>10% new credit</li><li>10% credit mix</li></ul><h2>Closing an active account can have a negative impact on your credit</h2><p><span>In addition to how much credit you're using and your ability to make on-time payments, the average age of your active accounts has an impact on your credit overall.</span> The longer an account is open, the better it is for your credit score. If you consistently make on-time payments on longstanding accounts, you're probably in great shape, credit wise. Accounts includes not only credit cards, but any "installment loans" you currently have, including student, home, auto, and personal loans.</p><p>The difference between credit cards and loans is that when you pay off a balance on the former, your card remains active. When you make the final payment on a loan, however, the account will be closed. Herein lies the problem: If the oldest account on your credit report is a student loan you took out 10 years ago, that account will no longer factor in to the average age of your <em>active</em> accounts once it's paid off.</p><h2>A temporary hit to your credit score is no reason to avoid paying off debt</h2><p>Credit-scoring agencies also look at something called your credit mix, though it's usually not a determinant of your credit score. If you have five credit cards, a mortgage, and an auto loan, you have a good mix of different types of credit. Paying off one of those loans will reduce your variety of credit.</p><p>When it comes to credit cards, your credit utilization ratio has a very high impact on your credit overall. Credit utilization is the percentage of your total credit limit you're currently using. Experts recommend aiming for a credit utilization between 10% and 30%. When you have outstanding credit-card debt, that ratio is likely to be higher. But when you pay off your balances, it goes down.</p><p>Even if your credit score drops slightly after paying off a credit-card balance, it won't last for long. As long as you don't close the account all together and continue making on-time payments for any new balances, your score should neutralize, and ultimately rise, in no time.</p><p>All that said, anticipating a temporary hit to your credit score is no reason to avoid paying off debt. Current debt balances - including debt you owe and debt you pay off each month - account for some 30% of your overall credit score, so paying them off has a much greater benefit in the longer run. Plus, the longer you drag out your debt, the more you'll hand over in interest payments.</p><h3>Related coverage from <a href="https://www.businessinsider.com/category/personal-finance-how-to">How to Do Everything: Money</a></h3><ul><li><h3><a href="https://www.businessinsider.com/what-is-an-excellent-credit-score" data-read-more-link="" data-e2e-name="read-more-link">Here's exactly what it takes to have an excellent credit score</a></h3></li><li><h3><a href="https://www.businessinsider.com/what-is-a-hard-inquiry-credit-report" data-read-more-link="" data-e2e-name="read-more-link">A hard inquiry dings your credit score every time you want to borrow money, but it's not a bad thing</a></h3></li><li><h3><a href="https://www.businessinsider.com/how-to-get-free-credit-report-check-credit" data-read-more-link="" data-e2e-name="read-more-link">How to get your credit report for free</a></h3></li><li><h3><a href="https://www.businessinsider.com/how-to-increase-credit-limit-credit-card" data-read-more-link="" data-e2e-name="read-more-link">How to request an increase on your credit limit to improve your credit score</a></h3></li></ul>

Your credit score may drop after you finally pay off debt, but it's only temporary

<p class="financial-disclaimer"><i>This article is brought to you by the <keyword id="9070397" type="UNKNOWN" weightage="60" keywordseo="personal-finance-insider">Personal Finance Insider</keyword> team. It has not been reviewed, approved, or otherwise endorsed by any of the issuers listed. Some of the offers you see on this page are from our partners, like <keyword id="6372865" type="UNKNOWN" weightage="60" keywordseo="citi">Citi</keyword> and American Express, but our coverage is always independent.</i></p><ul class="summary-list"><li>I created a spreadsheet to manage my family's rewards <keyword id="6387037" type="UNKNOWN" weightage="60" keywordseo="credit-cards">credit cards</keyword> to make sure we never miss a payment. It worked until one of my credit cards was closed because I hadn't used it in a while.</li><li>When a credit card account is closed, it can negatively impact your credit utilization and your average age of accounts, two important factors that determine your <a href="https://www.businessinsider.com/personal-finance/what-is-a-good-credit-score" target="_blank" rel="noopener">credit score</a>.</li><li>I tweaked the spreadsheet to include the last time I used a credit card. If I haven't used a card in the last six months, I make it a priority to use that card for a purchase.</li><li>Another method for making sure none of your cards are closed for lack of account activity is to set up a recurring payment, such as a streaming service subscription.</li></ul><p>As credit card rewards enthusiasts, my wife and I have over a dozen cards. With each new card, we earn a <a href="https://www.businessinsider.com/personal-finance/best-current-credit-card-signup-bonuses" target="_blank" rel="noopener">sign-up bonus</a> for <a href="https://www.businessinsider.com/personal-finance/easy-ways-meet-minimum-spending-requirement-credit-card-signup-bonus" target="_blank" rel="noopener">meeting a minimum spending requirement</a> in the first three months. After that, we continue using the cards when they offer great rewards in a certain category, like <a href="https://www.businessinsider.com/personal-finance/the-best-credit-cards-for-buying-groceries" target="_blank" rel="noopener">groceries</a> or <a href="https://www.businessinsider.com/personal-finance/best-credit-cards-for-dining-restaurants-food" target="_blank" rel="noopener">dining</a>.  </p><p>We don't use every single card on a regular basis, though. I generally use the Citi® Double Cash Card the most, along with the <keyword id="42561" type="COMPANY" weightage="60" keywordseo="chase">Chase</keyword> Sapphire Preferred® Card and the <a href="https://www.businessinsider.com/personal-finance/chase-freedom-vs-chase-freedom-unlimited" target="_blank" rel="noopener">Chase Freedom and Chase Freedom Unlimited</a>. </p><p>With a growing number of credit cards, we wanted to make sure we didn't accidentally miss a payment. To help with this, I set up a credit card bill-tracking spreadsheet and I update it couple of times each month. </p><h2>My credit card-tracking spreadsheet</h2><p>The spreadsheet tracks the following:</p><ul><li>The credit card name</li><li>The date the statement is usually issued</li><li>The date the bill is normally due</li></ul><p>It also has a column for each month, so I can mark that I checked the bill and made a payment, if necessary.</p><p>I thought the spreadsheet was working as planned to keep my <keyword id="6380214" type="PERSON" weightage="60" keywordseo="credit-score">credit score</keyword> in great shape until something unexpected happened ...</p><h2>One of my cards was closed because I hadn't been using it</h2><p>A few years ago, a credit card company notified us that it was closing one of our cards because we hadn't been using it. I'd heard of companies doing this before, but never experienced it myself before this incident.</p><p>Having a credit card closed can negatively affect your credit in a few ways. First, it can impact your overall credit utilization, or the amount of credit you use divided by your total credit limits. This is a factor in the second-largest portion of your <a href="https://www.businessinsider.com/personal-finance/which-factors-determine-your-fico-score-payment-history-is-key" target="_blank" rel="noopener">FICO score</a>, called amounts owed.</p><p>In my case, this didn't do any significant damage because I always pay my cards off in full. Had I been carrying a large balance on my other cards, though, this could have done considerable damage to my credit score.</p><p>The other part of my score that could have been affected was my length of credit history. This is a smaller portion of the FICO scoring formula but it still accounts for 15%.</p><p>By having a credit card closed, my average age of credit accounts decreased. Due to the large number of credit cards I had, this wasn't a major negative impact, either. That said, people with only a couple of credit cards could see their scores drop significantly if one of their older cards gets closed.</p><h2>My updated spreadsheet to avoid credit card closures</h2><div type="image" title="Spreadsheet example" height="287" width="1390" msid="76269583" hostid="261"></div><p>I tweaked my credit card-tracking spreadsheet to avoid having other cards meet the same fate. Rather than simply mark that I had taken care of a bill for the month, I now input one of two phrases.</p><ul><li>I input the word "Paid" for bills that had a statement balance and were paid in full.</li><li>The other option is "No Balance" for cards that didn't have a statement balance and did not require making a payment.</li></ul><p>To make this even easier to see, I fill the cell color green for "Paid" bills and yellow for "No Balance" bills.</p><p>This new method of marking my credit card spreadsheet each month gives me a visual representation of the last time I've used a card. If the word "Paid" is not marked within the previous six months, I make a priority to use that card for a purchase in the coming month.</p><p>After making a purchase, I wait for the statement to generate with a balance due so the activity reports to the credit bureaus. Then, I pay the card off in full and mark it "Paid" for that month. I haven't had a credit card closed due to non-use since implementing this new method.</p><p>If you want to avoid having a particular card closed due to inactivity, you can also set a recurring payment, such as your Netflix subscription, on a card. This way, the card gets consistently used every month. Just don't forget to pay the bill on time if you don't use the card for other purchases.</p>Related Content Module: More Credit Card Coverage

Banks can close your cards if you don't use them enough, but you can prevent this by using a simple spreadsheet

<p><em><span style="font-weight: 400;">Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.</span></em></p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Westend61/Getty Images</span></p><p class="caption">You can improve your credit score by focusing on just a few factors.</p></div><p></p></div></div></p><ul class="summary-list"><li><strong>You can improve your <a href="https://www.businessinsider.com/what-is-an-excellent-credit-score">credit score</a> by focusing on two factors: your payment history and your current debt balances.</strong></li><li>Credit bureaus tend not to share the exact calculations they use for credit, but they've shared an overall idea that makes it clear payment history and debt balances have a bigger impact on your score than anything else.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories.</a></li></ul><p>Your credit score is calculated using a formula with a ton of inputs. But while the companies behind your credit score don't make the exact calculation public, we do know the most important factors in our credit.</p><p>You may hear a lot of theories about tricks to <a href="https://www.businessinsider.com/5-easy-ways-to-boost-your-credit-score-2017-1" target="_blank" rel="noopener">quickly fix your credit</a>, but there are two places you should focus above anything else: Always pay on time and keep your rotating account balances low. If you can do those two things and resist the urge to tinker with your credit report, much of the rest of your credit will take care of itself.</p><p><em><strong>Read More</strong>: <a href="https://www.businessinsider.com/how-to-have-excellent-credit-multiple-credit-cards-2019-4">I have 26 credit cards and excellent credit. Here's the best advice I can give you on keeping up your score, no matter how many cards you have.</a></em></p><p>Here are the two most important strategies you can use to build an excellent credit score in the short and long-term.</p><h2>The factors in your credit score</h2><p>While we don't know <em>exactly</em> how your credit score is calculated, the big credit scoring agencies have given us a lot of insight into the high-level factors. These are the <a href="https://www.businessinsider.com/what-is-good-fico-score-2017-1" target="_blank" rel="noopener">top five inputs in your credit score</a>:<strong> </strong></p><ul><li>35% payment history</li><li>30% current debt balances</li><li>15% length of credit history</li><li>10% new credit </li><li>10% credit mix</li></ul><p>If you add up the bottom three factors, you get 35% of your credit score. That means the top factor alone is worth as much as the bottom three combined.</p><p><em><strong>Read More</strong>: <a href="https://www.businessinsider.com/keep-credit-score-high-opening-closing-credit-cards-2019-4">After years of experimenting, I've figured out exactly what opening and closing credit cards does to your credit</a></em></p><p>While you should certainly not ignore your average age of credit, pursuit of new credit, and credit mix, those factors don't deserve much attention. Unless you are planning to apply for a new mortgage or auto loan in the next six months to a year, there are two clear places to put most of your efforts: payment history and current debt balance.</p><h2>Two inputs contribute more than half of your credit score</h2><p>Payment history makes up 35% of your credit score and your current debt balances make up 30%. Combined, that's 65% of your credit. If you put all of your efforts here, the rest should fall into place.<strong> </strong></p><p>Also, consider how your <a href="https://www.businessinsider.com/credit-score-around-the-world-2018-8" target="_blank" rel="noopener">credit score factors come together</a>. If you pay your credit card on time for years, your length of credit history will automatically go up over time. If you don't sign up for new credit accounts while doing it, your new credit factor won't drag down your score.</p><p>Now that you know where to focus, let's take a look at what you should do to get a perfect score in the payment history and debt balances portions of your credit score.</p><h2>Never, ever make a late credit or loan payment</h2><p>The most important factor in your credit score is your payment history, so this deserves the most focus. Further, a late payment stays on your credit report for seven years, so it takes a long time to fix a mistake in this area.</p><p>Contrary to a popular myth, you don't need to <a href="http://creditkarma.sjv.io/c/196318/537307/9112?subId1=bipfi_032819_credit-score-focus-points&amp;u=https%3A%2F%2Fwww.creditkarma.com%2Fcredit-cards%2Fi%2Fcarrying-a-balance-good-or-bad%2F" target="_blank" rel="noopener">carry a balance to build an on-time payment history</a>. If you don't have to make a payment, it is considered similar to an on-time payment. Just make sure you use your cards at least every once in a while to avoid having them closed for inactivity.</p><p>The easiest way to avoid late payments is setting up automatic payments, or auto pay. I have a few old credit cards that get a small charge every month - one gets Netflix, one gets Spotify, and one gets Hulu. I don't use those cards for anything else generally, so I have automatic payments set up and I never have to worry about paying late or overdrafting.</p><p><em><strong>Read More</strong>: <a href="https://www.businessinsider.com/how-to-build-credit">The best way to build your credit is the same strategy people use to build wealth</a></em></p><p>On my more active accounts, I generally pay them off in full a few times per month. This helps me avoid having to make one big payment at the end of the month. There is no penalty for making extra payments, there is only a penalty for missing them.</p><p>If there is any one thing you should do for your credit, it is always pay on time. No exceptions.</p><h2>Keep your credit card balances at zero</h2><p>The second biggest factor is your credit balances, which make up 30% of your score. If you have bad credit and high credit card or credit line balances, paying them off in full is often the fastest way to improve your score.</p><p>Paying off your credit cards may be easier said than done, but the best strategy for your balances is keeping them at $0, or paying them off in full each month to $0. If you pay off your card in full by the due date, you never have to pay interest.</p><p><em><strong>Read More</strong>: <a href="https://www.businessinsider.com/new-credit-cards-bonuses-hurt-credit">I've opened more than a dozen credit cards and figured out exactly how opening a card for the bonus affects my credit</a></em></p><p>Paying on-time and keeping your balances low saves you money <em>and </em>builds your credit. If you have credit card balances, paying them off is the biggest win-win you can find. It may be easier said than done, but sticking with a <a href="https://www.businessinsider.com/how-to-get-out-of-debt-snowball-vs-debt-avalanche" target="_blank" rel="noopener">debt avalanche plan</a> may help you get those balances paid off for good.</p><h2>Don't obsess over the little things</h2><p>I have ultra-frugal friends who obsess over things like saving 10 cents on a tube of toothpaste or a nickel on shampoo. While a penny saved may be a penny earned, focusing on budget big wins can put hundreds or thousands of dollars back in your pocket. Your credit works the same way.</p><p>A new credit inquiry typically dings your score by just a few points, where carrying a large balance on your credit cards can drag it down by dozens of points. A single late payment is a lot worse than a few inquiries. Focus on the big things, not the little things.</p><p>For your credit, the two big things are paying on-time and keeping balances low. If you can do those two things, you are on track for short-term and long-term credit success.</p><h3>Need help with your credit score? <a href="http://www.kqzyfj.com/click-6415797-12190050?sid=bipfi_042419_improve-credit-score">Our partner Experian offers credit reporting and repair »</a></h3>

Your credit score is based on a complicated, murky calculation, but you can fix it by focusing on 2 easily controllable factors

<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd"><html><body><p dir="ltr"><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div><p></p></div></div>If you have great credit, you probably pay your credit-card bill in full every month, which means the interest rate isn't a deciding factor when you're selecting a new card.</p><p dir="ltr">But even money-smart consumers need to make huge purchases from time to time. If you need extra time to pay off something expensive - a new computer or a couch or a car - and don't want to accrue interest, an interest-free credit card may be your smartest option.</p><p dir="ltr">With so many card offers available and different fees to consider, it can be difficult to decide which card is right for you. <a href="http://www.comparecards.com/?k=BI008&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">CompareCards.com</a>, a leading provider of credit-card information and resources to help consumers choose wisely, has put together tips on how to choose the best 0% APR credit cards, along with three strong credit-card options to consider.</p><h3 dir="ltr">What to look for in 0% APR credit cards</h3><p dir="ltr">The biggest determining factor when choosing a 0% APR credit card is the length of the introductory period. The longer you can go without paying a dime in interest payments, the better.</p><p dir="ltr">Here are some other key features to look for when choosing your next interest-free credit card:</p><p dir="ltr"><strong>No annual fee:</strong> Consumers should never pay for an interest-free card unless the benefits far outweigh the annual fee. What's the point of saving money on interest-free payments if you have to fork over a fee each year?</p><p dir="ltr"><strong>High credit line:</strong> Having access to a high credit limit will allow you to make those large purchases and can also help with your <a href="http://blog.comparecards.com/infographics/credit-utilization/?k=BI002&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">credit utilization ratio</a>. Although consumers can't choose their credit limit, managing your credit responsibly can help you become a low-risk consumer and make lenders more comfortable with giving you a higher limit.</p><p dir="ltr"><strong>Additional benefits and features:</strong> Credit cards for those with excellent credit will come with benefits such as travel insurance, roadside assistance, and extended warranties.</p><h3>Which low-interest credit card should you choose?</h3><p><strong>1. <a href="http://www.comparecards.com/credit-card/citi-simplicity-card?k=BI003&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">Citi Simplicity Card</a> <div class="KonaFilter image-container display-table float_right"><div><div class="image"><a href="http://www.comparecards.com/credit-card/citi-simplicity-card?k=BI003&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank"></div><p></p></div></div></strong></a>Why you should get it:</strong> Not only do cardholders pay no interest for the first 15 months of their card membership, but they also earn rewards with every purchase.</p><p dir="ltr"><strong>What to know:</strong></p><ul><li>0% APR for 15 months on purchases and balance transfers.</li><li>A balance transfer fee of $5 or 3%, whichever is greater.</li><li>Earn cash back twice; 1% cash back when you buy, and 1% cash back when you pay for those purchases.</li><li>No annual fee.</li></ul><p dir="ltr"><strong>3. <a href="http://www.comparecards.com/credit-card/slate-from-chase?k=BI006&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">Chase Slate</a><strong><a href="http://www.comparecards.com/credit-card/slate-from-chase?k=BI006&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank"><strong><br class="Apple-interchange-newline"><div class="KonaFilter image-container display-table float_right"><div><div class="image"></div><p></p></div></div></br></strong></a></strong></strong></p><p dir="ltr"><strong>Why you should get it:</strong> Chase Slate has long been known as the best balance-transfer credit card. It is the only credit card on the market to waive the balance transfer fee for the first 60 days of card ownership, making balance transfers completely free.</p><p dir="ltr"><strong>What to know:</strong></p><ul><li>0% APR for 15 months on purchases and balance transfers.</li><li>$0 introductory balance transfer fee for transfers made during the first 60 days.</li><li>No annual fee.</li><li>Free monthly FICO score and Credit Dashboard.</li></ul><h3 dir="ltr">Minimizing interest charges</h3><p dir="ltr">Once your introductory period of interest-free payments has ended, it's important to <a href="http://blog.comparecards.com/infographics/credit-card-interest-infographic/?k=BI007&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">understand credit-card interest </a>charges so that you can continue saving money. The key is to reduce the average daily balance as much as possible. There's also no need to wait until the statement due date to make a payment. Cardholders should make payments as often as possible.</p><p dir="ltr"><a href="http://www.comparecards.com/saved-credit-cards?k=BI001&amp;place=170-710-27-426&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">Learn more about zero-interest credit cards</a>.</p><p dir="ltr"><em>This post is sponsored by <a href="http://www.comparecards.com/?k=BI008&amp;utm_source=business%20insider&amp;utm_medium=paid%20post&amp;utm_campaign=Business%20Insider_4202015_0APR" target="_blank">CompareCards.com</a>.</em></p><p dir="ltr">Find out <a href="http://www.businessinsider.com/sponsor-posts" target="_blank">more about Sponsored Content</a>.</p></body></html><p class="tagline"><strong>Follow BI Studios on <a href="https://twitter.com/bi_studios_" target="_blank">Twitter</a> and <a href="https://www.facebook.com/BusinessInsiderStudios" target="_blank">Facebook</a>.</strong></p>

The best credit cards for interest free payments

<p class="financial-disclaimer"><i><keyword id="9070397" type="UNKNOWN" weightage="60" keywordseo="personal-finance-insider">Personal Finance Insider</keyword> writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.</i></p><ul class="summary-list"><li>Building good <keyword id="6354680" type="UNKNOWN" weightage="60" keywordseo="credit">credit</keyword> with a credit card requires spending less than your credit limit allows and promptly paying off the bill each month.</li><li>If you've never had a credit card or <a href="https://www.businessinsider.com/how-to-get-a-loan">taken out a loan</a> before, consider becoming an authorized user on a friend or family member's credit card or applying for a secured credit card.</li><li>Your credit card payment activity and credit utilization will be reported to the credit bureaus, which will each create a <a href="https://www.businessinsider.com/how-to-get-free-credit-report-check-credit">credit report</a> in your name. </li><li>Your credit report documents your entire <keyword id="88181" type="PERSON" weightage="60" keywordseo="credit-history">credit history</keyword> and will determine your <a href="https://www.businessinsider.com/category/credit-score">credit score</a>, the three-digit number lenders use to evaluate your ability to pay back a loan.</li></ul><p><a href="https://www.businessinsider.com/how-to-build-credit">Building good credit</a> from scratch can seem intimidating, but all it really takes is time and smart habits.</p><p>There are a few ways to build credit, but you can start small by using a credit card. Here's how it works:</p><h2><keyword id="9789096" type="UNKNOWN" weightage="60" keywordseo="how-to-build-credit-with-a-credit-card">How to build credit with a credit card</keyword></h2><h3>1. Become an authorized user</h3><p>One of the easiest ways to establish credit from nothing is to become an authorized user on your parents' or partner's credit card. An authorized user is basically an extension of the primary cardholder, but isn't responsible for paying the bill and doesn't have to undergo a credit check.</p><p>But as an authorized user, your credit report will track the credit card's payment and utilization history, so it's important to choose someone who is financially responsible.</p><h3>2. Try a secured credit card</h3><p>You may try a secured credit card to start building credit on your own. With a secured credit card, you make a cash deposit to a bank or financial institution to establish a line of credit and then use the card to make purchases up to that limit. When you pay the bill each month, the bank will report your payment activity to the three credit bureaus, Equifax, TransUnion, and Experian, which will each establish a credit report in your name.</p><p>If the bill ever goes unpaid, the bank can keep your deposit. If you pay on time consistently, you should eventually qualify for a non-secured card and may even be upgraded by your bank.</p><h3>3. Apply for a credit card with good rewards</h3><p>Once you've established some credit history, you're probably ready to apply for your own credit card. Any credit card worth having these days will come with a suite of benefits and rewards, whether it's bonus points, cash back on qualified purchases, or travel perks. Some of the top tier <keyword id="6387037" type="UNKNOWN" weightage="60" keywordseo="credit-cards">credit cards</keyword> levy an annual fee as high as $450, but there are many great, <a href="https://www.businessinsider.com/best-no-fee-credit-card">no-fee credit cards</a> to choose from.</p><p>You can apply for a credit card online and the bank will perform a hard inquiry on your credit report. It usually only takes a few minutes to get approved, unless the bank needs to verify your income.</p><h3>4. Check your credit limit</h3><p>When the bank approves you for a credit card, it will set a credit limit based on your income and other factors in your credit report. The amount of your total available credit limit that you spend each month becomes your credit utilization rate.</p><p>You want to aim for a credit utilization rate of 10% or less to maintain a <a href="https://www.businessinsider.com/what-is-a-good-credit-score">good credit score</a>. The more lines of credit you have, the easier it gets. If you consistently keep your spending below the limit and make on-time payments, the bank may automatically increase your limit. You can also call and <a href="https://www.businessinsider.com/how-to-increase-credit-limit-credit-card">request a credit limit increase</a>.</p><h3>5. Know your payment due date</h3><p>Before you start swiping your credit card, you should know when your monthly payment is due. This will be listed on your online account and is the date that your full outstanding balance is due every month to avoid late fees.</p><h3>6. Know your annual percentage rate (APR) </h3><p>Every credit card has an APR, or annual percentage rate, which is the percentage of your outstanding balance you'll be charged for keeping a balance on the card past the payment due date.</p><p>The APR on a credit card depends in part on your credit history and can range from 17% to 26%, though some cards offer introductory APRs as low as 0% that last for a few months after opening the card. Some banks raise your APR if your payments are late.</p><p>Ideally, you shouldn't be concerned with the APR if you plan to make full and on-time payments on your credit card. But it's still smart to choose a credit card with a low APR in case you do end up carrying a balance at some point; high interest rates can quickly snowball your debt.</p><h3>7. Use the card to make purchases</h3><p>If you opened a rewards credit card, start using the card to make purchases that will earn you points, miles, or cash back. </p><h3>8. Make a habit of checking your transaction history</h3><p>When you're swiping a card rather than handing over cash, it can be easy to lose track of how much you've spent. Get in the habit of checking your transaction history once or twice a week to make sure you're not creeping too close to the credit limit.</p><h3>9. Pay off the balance in full every month</h3><p>Every month, you're responsible for paying off the full current balance on your account. If you don't pay your full balance on or before the due date, it will start accruing interest until it's paid, you'll get a late fee, and the credit bureaus will be notified of your missed payment.</p><p>If you only pay the "minimum payment" listed on your account by the due date, you will avoid the late fee, but the remaining balance will still start accruing interest. </p><h3>10. Set up auto pay</h3><p>If you're afraid you may forget to manually make your monthly payment, connect your credit card account with a checking account that will automatically pay your bill on the same date every month — just make sure there's enough money in the account to cover it.</p><h3>11. Don't apply for more credit too soon</h3><p>New credit inquiries show up on your credit report each time you apply for a new loan or credit card and temporarily bring down your score by a few points.</p><p>If you have too many inquiries in a short period of time, lenders may consider that a high risk and deny your application or give you a less-than-ideal interest rate. If you're new to establishing credit, it's best practice to space out your credit applications by at least six months.</p>Related Content Module: More Credit Card Coverage

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