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This is How You Should Be Using Your Credit Card


Credit cards are truly powerful financial tools.

When used strategically, they can help you handle emergencies, earn rewards, and build credit.

And yet, as useful as they may be, some people may misuse their credit cards and get into financial trouble. Maybe that’s why credit card debt in the U.S. just hit an all-time high of $930 billion.

So before you use your new (or old) credit card, make sure you understand the rules of engagement.

Here’s a quick explainer to help you get started:

Step 1: Know Your Credit Card APR and Fees

Even though credit card agreements can be complex, you need to know exactly what you’re agreeing to before you sign anything.

The terms and conditions aren’t mere suggestions, after all. They’re legally binding.

Make sure you know the essentials, like your annual percentage rate (APR), your credit limit, your minimum payment, and your due date.

Then, get total clarity on any fees you might incur:

  • Is there an annual fee?
  • If so, how much?
  • What about late fees or other fees?

Once you have the answers you need, you can move forward with confidence.

Step 2: Always Make Payments on Time

This is the “golden rule” of credit cards.

When you make payments on time, you’ll keep your account in good standing. Period.

Plus, timely payments could also increase your credit score. After all, 35% of the FICO® model accounts for payment history.

Conversely, missed payments may lower your credit score and could even end up on your credit report for an extended period of time.

According to Equifax,Negative information such as late or missed payments…stays on credit reports for approximately seven years.

Protect yourself by making payments on time. Every time.

P.S. Learn more about the five factors that determine your credit score.

Step 3: Pay More Than the Minimum

While making payments on time is great, paying them in full is ideal.

It’s the #1 way to avoid penalties, fees, and a revolving balance.

It can be very tempting to only pay the minimum.

However, paying more than the minimum could help keep your credit-utilization ratio below its suggested limit of 30%, which may help improve you credit score.

Step 4: Use Less Than 30% of Your Credit

Credit cards have limits — and they deserve respect.

For example, let’s say your card has an available credit limit of $1,000.

While you can borrow the full amount, using more than $300 — or 30% of your available credit — could ultimately harm your credit score.

There are two reasons for this, and both of them have to do with the number 30.

For starters, the three major credit bureaus encourage users to keep their credit utilization rate below 30% (as mentioned above).

On the other hand, your credit utilization ratio also accounts for 30% of the FICO® scoring model. So while payment history is the biggest determinant for your credit score, the amount you borrow is almost as influential.

Long story short: only borrow what you absolutely need.

Note: If you have multiple credit cards, the 30% rule still applies. For example, if you have one card with a $1,000 limit and another with a $2,000 limit, you should try to only borrow up to $900 (3,000 x .3 = 900) to stay below the 30% utilization rate.

Step 5: Carefully Review Your Monthly Statements

Credit cards are safe, reliable, and convenient.

And yet, as secure as they might be, fraud sometimes occurs. In 2021 alone, roughly one-in-ten credit and debit card users experienced some type of fraud.

That’s why it’s very important to review your monthly statements and make sure every transaction is legitimate.

If you don’t recognize a charge, be sure to report it to your card company immediately.

P.S. As you review credit card companies, be sure to investigate their security policies. After all, you should have confidence you’re 100% covered if your card is ever lost, stolen, or fraudulently used.


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First Phase Visa® is issued by The Bank of Missouri pursuant to a license from Visa U.S.A. Inc.

First Phase reports payment history to the three major credit bureaus so it can help build your credit if used responsibly. Building credit is accomplished by keeping your balance low and paying all your bills on time every month. Late payments, missed payments, or other defaults on your account may be reflected in your credit report and may impact your ability to build credit. First Phase begins credit reporting following your first purchase or cash advance using your card.

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This information is presented for educational purposes only. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.