How Can Credit Cards Maximize Your Financial Health?

A credit card can be a useful tool to help you manage your finances and build your credit history. When used properly, credit cards can offer a convenient way to pay for day-to-day expenses and may help you build credit, earn rewards, or provide additional benefits depending on the type of card you have. But if you’re not careful, a credit card could lead to poor credit, overspending and debt. Here are four key ways you can avoid the pitfalls and ensure you credit cards benefit your financial health.

1. Set up pre-paid bill payments.

The biggest factor in your credit score is whether you pay your bills on time. A history of late payments and overdue accounts can have a negative effect on your credit score.

You can streamline the process of paying your bills by using your credit card to make the payment. Simply pre-authorize your bill payments, and they will happen automatically each month. Plus, with the right rewards card, you can earn benefits for items you were going to pay for anyway.

Be mindful that some businesses charge a “convenience fee” when customers pay with a credit card. Before you set up a pre-paid payment, contact the vendor and see whether they charge a fee.

2. Improve your credit score with on-time monthly payments.

Most people know that exceeding your credit limit and maxing out your credit card can cause your credit score to drop significantly. However, what is often not clear is how your credit card can help you boost your credit score, which in turn can help you achieve lower interest rates or better home or car loans.

The biggest step you can take is making sure you pay your credit card bill on or before the due date every month. You’ll need to pay at least the minimum amount, and you should aim to pay more, even if the full balance isn’t feasible in any given month. This will help you avoid late fees and minimize interest charges. It’s also a good rule of thumb to regularly check your transaction history. Having a rough idea of your recent spending can help ensure you’re staying within your monthly budget.

3. Maximize rewards to either invest cashback in savings or use points to reduce spending in other areas.

To gain the most benefit from credit cards, you should leverage the rewards programs. The best rewards cards offer an array of advantages.

If you travel frequently, look at a travel rewards card. When you redeem your accumulated card rewards for travel, you can save money on airfare and hotel accommodations.

If you are looking to earn money back on your purchases, a cashback rewards card might be the right choice. Instead of spending your cash back earnings, consider using them to build a nest egg - you might be surprised at how fast your money grows. CUA’s line of cards offers a range of options; shop around and find the right card for you.

Before you pursue any sort of rewards, you need to know that you can pay your balance in full. Keep in mind that living beyond your means and accumulating interest and credit card debt will cost you more than any potential earnings from rewards.

4. Understand the features and benefits of the credit card you use.

Did you know that some credit cards offer additional benefits and coverage? From emergency health insurance to extended manufacturers’ warranties, you may be eligible for discounted rates. To get the most out of your credit card, it’s important to know any products and services that may come with your card. Ask your vendor to provide you with a list of any features and benefits.

Credit cards can be an effective tool to manage personal finances, save money and build strong financial health. Using credit cards in a disciplined manner can contribute to positive financial health and support a higher credit score. Take our Financial Health Index quiz to learn how you are doing in managing your finances. If you would like to speak to a member of the CUA team about finding the right credit card for you, or have questions about improving your credit, give us a call at 902.492.6500.

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