Credit Cards: The Most Dangerous Game

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buy all the thingsHigh credit card balance? Just get another one to pay it off, right? WRONG! How can you win this uphill battle? Knowing the cheat codes would help. Luckily, you’ve got a ringer in your corner. The cheat codes for this game has a few components. Having a professional in your corner for guidance will help you level up.

I touched on credit card utilization in the past, now we’ll dive a bit deeper. So many people, (especially when they’re young and get their first credit card,) say, “hey! I have a $500 limit! I can go buy the new PlayStation and a bunch of games!” As long as you don’t go over the limit it’s all good, right? Not even close. Having a balance higher than 30% of your limit can actually put you in the “high risk” category if you go apply for a new line of credit. For instance, if your limit is $500, your balance should be around $150. I know that may sound silly, or even scary to some of you, but as far as what lenders and creditors look at, it’s becoming a bigger deal. Having a monthly balance, is actually okay, using your card is a good thing. The most important component is making at least the minimum monthly payments on time, I cannot emphasize how crucial it is.

On-time payments is absolutely the most important thing. When creditors and lenders see late payments, they immediately think, “if this person can’t make payments on-time for the lines of credit they already have, why should they pay us on-time?” As I mentioned, carrying a 30% balance isn’t bad, (except if you have a higher APR and getting charged tons of interest,) as long as the monthly minimums are paid on-time.

How many credit cards you should have is another one to pay attention to. Many financial advisors recommend having 2-4 credit cards, depending on your income, and how many assets you have, to help keep the utilization on point. Some people have problems remembering due dates, avoid this by making yourself a schedule to keep track, or setting up payment reminders. Designating one card for everyday usage, and another in case of an emergency is one way to help keep things under control as well. The bottom line is to know what your financial state is, and not taking on more than you can handle. Don’t get more cards, just to pay off the other ones.

Having a good handle on where your credit and finances stand, and seeking help from a professional who can guide you, and help you make educated, and informed decisions. We can help you find the right balance and path that will be the most beneficial for you. Get in touch with Inversion Credit today!

 

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