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5 Strategies
2. Set up monthly automatic statement payments. One of the biggest cons of credit cards is how easy it is to carry over balances month to month; instead of not using a credit card at all due to this fear, set it up to where you automatically pay off your credit card in full every month without compromise.
By doing this, you will be more conscientious of your spending, or else your checking account will result in overdraft fees. You will also avoid cutting off more than you can chew. One of the biggest reasons Dave Ramsey proposes using cash for purchases is because you feel cash purchases more than plastic purchases (i.e., credit card purchases). You also stay more in tune with how much cash you have available to spend.
When you force yourself to pay off your credit card bill each month, you’re reminded not to spend more than you can pay. You don’t want to be depressed about paying your monthly credit card bill because you’ll have no money left over after paying it.
3. Never use more than 10–30% of your credit limit. If you have a 50k credit card limit, spend no more than $5,000-$15,000 of your total credit card limit. 0–10% is always better, but in the end, your utilization doesn’t matter more than paying off your credit card balance in full each month.
4. Put rewards back on your credit card balance. Many credit cards offer perks, points, and cashback. If you can convert any of these rewards into decreasing your credit card balance, go for it.
5. Don’t allow others to use your credit card. Many people become extreme givers when they get a new credit card with a high limit. Now they consider themselves high rollers.
Stop right there.
I’ve seen people do this, and what happens is that they (or their friends and family) end up racking up tremendous debt without even realizing it.
No one will review your credit utilization and bill other than you and your credit card company. This means you need to maintain complete responsibility for your credit card at all times to avoid maxing out your credit card and not being able to pay off the balance at the end of the month.
It takes one month to get behind on a credit card and lose control. Credit card companies know this, which is why they love providing many card recipients with high credit limits. As long as consumers can afford the minimum payments, credit card companies can lock them into payments for decades.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.