A credit card is generally our first opportunity to build and increase our credit scores.
However, many young black people are not prepared to handle the responsibility of a credit card, because our parents may not have taught us how to use a credit card correctly.
In this article, I will teach you the most effective way to manage a credit card. Following these steps will improve your credit and keep you out of debt.
Are Credit Cards for Emergencies?
This would depend on what your definition of an emergency is.
Everyone should make it their goal to have some money tucked away in a savings or long-term investment account.
If you are stuck on the side of the road and you need to call for a tow, you may need to have some form of electronic payment to settle the bill. A credit card will come in handy during these moments. However, you should use the credit card as a temporary loan that you will pay back immediately.
If your furnace goes out or you need a new transmission, and you don’t have the savings available, a credit card should not be the go-to source for emergency cash.
The interest rates on credit cards are generally too high to justify using them for large unexpected purchases.
Therefore, you should avoid using credit cards for emergencies.
What is the Purpose of a Credit Card?
I just told you that you shouldn’t use a credit card for emergency purchases. So, you may be wondering what the purpose of a credit card is.
The answer to this question primarily depends on your financial situation and your level of discipline.
However, for this article, I will suggest that most people should use a credit car ONLY to improve their credit scores.
If you remember this goal, you will avoid misuse of your credit card.
Learn How to Use a Credit Card to Improve Your Credit Score.
What Should you Buy with Your Credit Card?
In order to improve your credit score, you should use your credit card for the following things:
- Things you can afford
- Things you would have bought anyways
- Things you NEED
How Much Should I Charge to My Credit Card?
You may have heard that you should never use more than 10% of your credit card balance. While there is some truth to this statement, it is somewhat misleading.
The reality is, you can use more than 10% of your credit card. The secret is that you have to make sure that only 10% or less of the balance is reported to the credit bureaus.
Now, you may be wondering – how do I control what the credit bureau reports? If you know when your creditors report information to the credit bureaus, you will have greater control over the information.
Learn more about that in my article here.
