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10 Steps to Using Your Credit Card More Wisely

For the more than 75% of American adults who use them, credit cards can deliver substantial benefits. Among them, the powerful financial tools can offer consumers everyday convenience, added purchasing power, protection against fraud, a chance to build good credit, and rewards such as cash back, miles and points.

But there is, of course, a considerable catch to all the benefits that credit cards can present. To leverage their advantages — while avoiding the debt-related pitfalls they can present — credit cards must be used responsibly. So it’s important for those who carry them to know how to properly use a credit card.

10 smart credit card tips

With that in mind, today’s blog article focuses on how to properly use a credit card wisely. If you’re looking to learn about the smartest ways to use a credit card, consider these 10 tips geared toward reaping all the benefits a credit card can deliver — and avoiding the dangers that can be inherent with revolving credit:

  1. Know your credit card’s interest rate — Credit card issuers make money by charging interest on the funds that credit card holders borrow. A credit card’s interest rate is typically expressed as a yearly rate. Known as the annual percentage rate (APR), it’s a percentage figure that represents the annual cost that a card holder pays to borrow money, typically including interest and fees but excluding any compounding.
    In most cases, there are several ways to find out what your credit card’s APR is. Among them, you can review your credit card statement, check your card’s terms and conditions, visit your card issuer’s website, or call your issuer directly and request the APR information.
  2. Understand what ‘minimum payment’ really means — As the name indicates, a minimum payment is the lowest sum you’re required to pay on your credit card each billing cycle. But it’s typically only a fraction of your full balance. It’s wise to pay off much more than your minimum payment each billing cycle — and to pay off your full balance whenever possible (more on that below). If you pay only the minimum payment (or anything less than the full balance) each billing cycle, you’ll carry debt over to the next billing cycle and will be charged added interest.
  3. Aim to pay off your full balance each month — The charges you put on your credit card will not accrue interest if you pay off your balance on time each billing cycle — it’s only charged when you carry a balance over from one billing cycle to the next. So if you pay off your balance in full each billing cycle (which is typically monthly), you can avoid paying interest on the charges you put on your credit card altogether. In essence, by doing this, you’re able to borrow money each billing cycle at no charge.
  4. Never skip a payment — Delinquent credit card payments can not only result in late fees and higher-than-normal interest rates, they can also harm your credit score — which can make it harder to secure a loan when you need one in the future. To avoid all these headaches while keeping your credit score intact, make sure you always make a payment on your credit card during any billing cycle when you’re carrying a debt.
  5. Consider making multiple payments per billing cycle — In most cases, there’s no rule against making more than one credit card payment per billing cycle. And a great strategy for avoiding missed payments (and the above-mentioned consequences they can bring) is to make payments before the due date, such as each time you get a paycheck or whenever you might have extra funds available.
  6. Try to keep your credit utilization rate low — Another reason to pay your credit card bills on time and to knock down your balance as much as possible each billing cycle is that your “credit utilization rate” plays a major role in determining your credit score. This is a measure of the portion of the available credit you’re actually using vs. the total amount of credit you have available. You can keep it lower (which gives a boost to your credit score) by keeping your credit card balances as low as possible.
  7. Carefully review your credit card statement regularly — Unfortunately, even the most careful among us can fall victim to credit card fraud. And by keeping a close eye on your credit card statements each billing cycle (or even more frequently by checking your credit card’s online account or app), you can more quickly identify any suspicious or fraudulent activity you may discover. If you do spot any unfamiliar purchases and/or charges, be sure report it to your credit card issuer’s customer service department as quickly as possible. The sooner you do so, the sooner steps can be taken to stop any additional fraudulent activities and reverse any fraudulent charges.
  8. Keep a copy of your credit card information in a safe place — If your credit card is ever lost or stolen, you’ll need to know your account information and your issuer’s details so you can report the card missing. So it’s a good idea to keep a copy of your credit card number and your issuer’s customer service phone number in a safe place at home so that you can cancel the card and report any fraudulent activity right away if this ever happens.
  9. Reap your rewards — Many credit cards offer rewards for use, with options ranging from cash back to travel perks, points and more. When you are looking for a new card, try to find one that offers a rewards program that’s compatible with your lifestyle and preferences. And if your current card offers a rewards program, take a deep dive into the details so that you can make the most of the benefits you receive from the program. (Of course, make sure you don’t get so caught up in the rewards program that you take on debt you can’t afford to pay back. Often, you can find ways to maximize your reward benefits with spending on necessities and/or other expenditures you already had planned.)
  10. Use your credit card as a budgeting tool — Many credit cards offer personalized websites and apps with features that help you track your spending. Often, they’ll even break your expenditures down into categories such as housing, food, travel, medical, entertainment, etc. for you. If you’re looking to create and maintain a household budget and take more control of your spending, these can be a great budgeting tools to leverage, especially for added insights on areas where you might be able to cut down on your spending and save.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.

Man doing his banking online

AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.

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Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.

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Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:

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Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.

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Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.

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Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.

Contingencies:

  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.

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Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.

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Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.

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Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.

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Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
  • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.

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