The primary goal of every credit card user is to pay their credit card dues. A credit card provides a source to spend now and pay later. If you spend using the credit card, from the billing cycle you get thirty days to repay the amount.
Once you have utilized your credit card it is obvious that you have to pay off. A good credit card user who follows important things about paying off a credit card are given below.
- Monthly pay off your balances in full
- Debt counseling helps
- Know the importance of Savings fund
- Think before you close your credit card account
Monthly pay off your balances in full
It is a special event for wiping out your credit card outstanding balance. Using credit cards wisely means you are spending wisely.
The best way to make use of credit cards is to spend using credit cards and pay off each month fully. You can get a positive response on your credit score if you follow this way. You will pay very little on your credit card for its usage.
The credit card companies make more money when you pay minimum balances on credit cards each month and keep rotating your credit dues.
Debt Counseling helps
To become a debt-free cardholder a debt counseling can be a great help. It can give you counseling and provides training in creating budgets and helps to create plans to settle payments.
To increase the chances of successful payments you can sign up for a debt management plan. A debt management plan can help you to consolidate all your different payments into one payment. This consolidated payment will be sent to the credit counseling agency. This credit counseling agency will pay all your creditors in full. The debt management plan will enable you to bring your account on current.
Know the importance of Savings fund
When you start using your credit card account always have the idea to open a savings account. A Savings account can come as a rescue to you when you spend more than what you have in your account. Put some amount each month from your monthly salary or business income aside and then start spending using a credit card. The idea is to give priority to savings and then begin spending.
A savings account can help you clear your credit card debts. Do not be tempted to spend extra just because you have saved money. Your financial goal for creating a savings account should be to meet any emergency or job loss. It can prevent you from getting into huge credit card debts.
Think before you close your credit card account
When you pay off your credit card it is a moment of freedom. You may never look back and close your credit card account.
It is not the best idea to close your credit card account. If you have already paid your monthly installments on time you should have a good credit score and a healthy history. Having an available balance on credit cards will give good benefits and you can build a good credit score.
Credit scores help you to get faster approval on loans. If you have different loans and credit cards, closing a credit card may affect your credit score.
But if you have multiple credit cards and your expenses are exceeding your income and you cannot afford to pay credit card bills. It is best to consolidate your credit card debt then close a high-interest credit card. This will help you to reduce interest payments on credit cards and close debt faster.
Think before you close your credit card and do the best that suits you according to the situation.
Click here to know about debt consolidation
When you pay off your credit card, the credit card score will not increase that higher as you expect. When you make your payments timely the credit score looks decent.
Paying off the balance on your credit card and closing it, will not increase your credit score it will only close one of the ways of creating a credit score.
The most effective way of building up a credit score is utilizing only thirty percent of available credit, paying off balances each month and managing credit wisely.
Conclusion
It takes time and money to pay off your credit card balances. If you understand the technique of handling your credit properly it will get you a good credit score. Money management skills and credit card management will ensure you stay stronger in financial position.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
