Responsible credit card use and financial peace-of-mind can go hand in hand
In the last few months of 2021, though, credit card balances for U.S. residents increased sharply by $52 billion to $860 billion, which is the largest quarterly jump in the 22 years the data has been tracked, according to the Federal Reserve Bank of New York.
It’s not all bad news, though. The Fed also said that total credit card balances are $71 billion lower for Americans than pre-pandemic levels in 2019. For 2021, that averaged out to a total of $6,006 owed in revolving credit card debt per U.S. household.
There are ways to manage your credit cards responsibly as you lay the groundwork for financial peace-of-mind in the future.
1. Pay on time every time
We say this often because it’s so important. Missing a due date on your credit card bill can ding your credit and lower your score. The easiest way to make sure you are always on time with your payment is to set up an automatic withdrawal from a checking or savings account a day or two before the bill is due. Forgetfulness is a terrible reason to lose ground financially.
2. Track your spending
It’s important to know exactly where your money is going every month. And research shows it’s much easier to overspend when you use a credit card instead of a debit card or cash. That little piece of plastic can feel like fake money…right up until the moment your bill arrives. Many people find that creating a monthly budget, either through an app or by the old-fashioned pen and paper route, helps them keep track of their hard-earned dollars. Budgeting also allows them to stay on top of credit card debts and other obligations.
3. Pay off your balance monthly
Don’t spend more on your credit card than you can afford to pay off at the end of the month. Period. Carrying a balance on a credit card is a fast way to dig yourself into more debt because of compounding interest. The longer it takes you to pay off a balance, the more you will spend.
4. Review your statement
Mistakes happen every day. That’s why you should look over your credit card statement every month (or more often online) to make sure you weren’t double charged for an item, or worse. Some scammers who get access to stolen card numbers will start out by charging smaller amounts that might not be noticed immediately.
5. Set up alerts
Many lenders and credit card companies now allow customers to set up real-time alerts so that you receive an email or text every time your card is used. That way, when a vendor triple bills your account for a single item, you can immediately alert the company to the error and dispute the charge.
Stay on top of your credit card accounts by signing up for various transaction alerts and notifications in Online Banking.