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Since credit is the ability to buy things now and pay for them later, it can be a very useful tool when used responsibly. The ability to show future lenders that you have a good credit history could help you land a car loan or a mortgage. Furthermore, it could possibly help you land a job as well since some employers take a look at the credit history of their applicants before hiring them.

But when abused it can become a very serious problem. It doesn’t take very long to rack up a $4,000 balance on your credit card but it could take you nearly 7 years or longer to pay it off fully if you were to only pay $50 a month. That’s only if you were to never charge another penny on your card again. So, in the spirit of avoiding indentured servitude here’s 3 tips to help you manage your credit and keep it a useful tool.

Tip #1 Check the Annual Fee and The Interest Rate

Always make sure, when reading credit card contracts, to read the fine print. Credit is not free money. Credit card companies may initially offer interests rates as low as zero percent, but once the promotional period ends those rates may change. So, make sure you understand what those new interest rates will be. Similarly, when researching credit cards attempt to find a company that doesn’t charge their cardholders an annual fee.

However, if you see that the card does have an annual fee, contact the issuing company to inquire about having it waived. Lastly, when it comes to offers like airline miles or other incentives, evaluate these cards carefully because they often have higher interest rates and annual fees.

Tip #2 If You Can’t Pay Then Don’t Charge It

Credit cards are not meant to be used as a means to financial freedom. They’re more like short-term loans that must be paid back every 30 days or less; so, if you can’t afford to pay cash, you shouldn’t put it on your card. Pay your balance off in full every month to use your credit wisely. Assuming you have an interest-bearing checking or savings account, paying off full balances every month allows your money to keep earning interest longer.

Tip #3 Use Another Way to Establish Credit History

Instead of using a national credit card to establish a credit history, begin with a single-store or single-purpose credit card. Most people start with a national credit card that can be used for anything anywhere. These cards can get you into trouble because the temptation to charge more than you can afford becomes too great. But if you began with a single-store credit card or a single-purpose credit card, such as a gas card, and used them responsibly by making occasional purchases and paying them off every month you can demonstrate to creditors your ability to use credit wisely.

Conclusion

By no means is this an exhaustive list but it always helps to start somewhere. If you just stay disciplined and follow these simple tips to manage your personal credit you can be on the road to financial freedom in no time.

Written by JOHN SELVEY

My thirst for knowledge, love for business and finance, along with my lifelong enthusiasm for writing and computer science pushed me into furthering my education through courses on business finance, personal finance, digital strategy, and web development. In addition to my educational pursuits, I have spent 10+ years in customer service with 2 of those years spent in the banking industry. In 2015 I became a father for the first time. And since, I have been dedicated to building a strong foundation for my family and community by pursuing my passions and utilizing my extensive background in customer service to start a small web production business with my wife.

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