How To Stay Responsible With Your Credit This Summer

Jacob Lunduski  |

As Summer is directly upon us, it’s easy to fall into the trap impulse spending on your credit cards. Unfortunately, this can lead to expensive debt. Consumers were found to spend up to around $5,400 a year on impulse purchases.

Credit cards are serious financial tools that impact your future depending on how you use them. The Federal Reserve reported that the total credit card debt surpassed $1 trillion at the turn of this year! With that in mind, it’s important to learn how to use your credit cards properly to make better informed decisions on how you spend your money and avoid debt.

The Basics Of Using Credit Cards Responsibly

  1. Understand How Credit History Works

Your credit history, also known as your creditworthiness, is essentially your reputation as a borrower of money. Based on the history of your credit, a company determines whether or not they want to do business with you, as well as the terms of how they will do business with you.

Your credit history can affect your ability to do things like:

  • Receive approval for a credit card, mortgage, or auto loan
  • Rent an apartment
  • Be approved for an insurance plan
  • Get a cell phone plan
  • Find employment

The process begins as credit lenders send information about your financial behavior to credit bureaus. Credit bureaus store the information and create your credit reports, which are then used to calculate your credit scores.

2. Understand Your Card

This is one of the most overlooked steps to using credit cards responsibly. It’s important to familiarize yourself with your card’s interest rates, limits, and fees. Also, be sure to note your statement closing and due dates. By taking the time to learn all the details of your credit card, you can avoid possible fees and penalties, as well as ensure your credit cards are paid on time.

3. Pay Fully and On-Time

The golden rule of using credit cards revolves around making purchases that you pay off fully every month. Think of your card as an extension of your bank account.

If you can’t pay off the purchase by the time your statement is due, debt and growing interest will cause damage to your financial health. On the other hand, if you make purchases with your credit card that you can afford, your card can be an asset that builds credit and saves money. Making full payments also allows you to take full advantage of the benefits or rewards many credit cards offer.

The Basics Of Reducing Debt and Rebuilding Credit

Now that you’ve seen how to use credit responsibly, you might find yourself asking, “What do I do if I’ve already damaged my credit?” Although it takes self-reflection and hard work, rebuilding your credit is possible.

  1. Review All Debts, Habits, and Spending

The first step to rebuilding your credit is to face any debt you currently have. After determining the amounts you owe, you’ll be able to review your spending habits to see what monthly costs are expendable. You can then create a budget that allows you to cover your necessities with all the extra money going towards paying off your debt.

Create a budget for any Summer trips you’re planning to prevent impulse spending. Having a plan and budget in place months before your trip allows you to put aside money to use. In addition, your plan will prevent you from overspending on your trip.

2. Repay Debts

Now that you have a plan in place, focus on reducing any outstanding debts you have. The two suggested methods for reducing debts are the snowball and avalanche methods.

With each method, you pay the minimum payment on all your debts, except for one. For that one account, you’ll pay as much as you can each month until the debt is gone. The difference between the two methods is the order in which you tackle your debts.

When following the debt avalanche method, you’ll focus on paying as much as you can monthly toward the account with the highest interest rate. With the debt snowball method, you’ll focus on paying as much as you can monthly toward the account with the smallest balance first and progress towards your highest balances.

3. Balance Transfers

Balance transfer credit cards are often used to help get out of credit card debt. If you’re carrying a balance on a credit card with an interest rate, you may be able to transfer some or all of it to a new credit card with 0% APR.

For example, imagine you have a $5000 balance on a card with an APR of 20%. You can afford a $300 payment every month. With such a high interest rate, it will take 20 months for you to pay off the debt and you’ll accumulate $900 in interest.

A balance transfer card is a better option in this situation if you qualify for one with 0% APR. You could transfer that $5000 balance to the new card and be able to pay it off in 17 months with the same monthly payment. You’ll get any debt cleared faster and avoid $900 in interest, while also benefiting your credit.

4. Financial Habits and Secured Credit Cards

Once your debt is gone, you’ll be able to focus on rebuilding your credit. Now that you’ve seen the mistakes made in your past, focus on creating better financial habits. Start using credit cards responsibly, and your credit will benefit.

When your credit is bad or limited, you won’t qualify for the best cards on the market. One way to help rebuild your credit is to apply for a secured credit card.

Secured credit cards require a refundable security deposit, which acts as your credit limit when you’re approved for a card. After you prove that you can use these cards responsibly, you’ll be able to qualify for other cards and build your credit.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:



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