Just like a true friend, a credit card can support, protect and reward you throughout your financial journey — but only if you use this resource wisely. Treating a credit card like it’s free money and maxing out the limit, for example, quickly turns this asset into an enemy.
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GOBankingRates spoke to three financial professionals about the dos and don’ts for maintaining a healthy friendship with your credit card. Here’s their best advice.
It Aligns With Your Lifestyle
Don’t seek out credit cards that look impressive for clout but don’t give you much, if anything, in return. Ideally, your credit card should complement your current lifestyle.
Lora Monfared, head of consumer credit card products at Bank of America, recommends determining which rewards structure most aligns with where you spend the most. Someone who regularly shops online, Monfared said, will look for a credit card where they can receive rewards for it.
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It Aligns With Your Purchases
As you look for a credit card to match your lifestyle, keep an eye out for a card that aligns with your spending style. Money expert Andrea Woroch said this means looking for a card where you’ll receive the most rewards on the purchases you most frequently make or at the types of stores where you shop the most.
“Look at your credit card statement over the last few months to figure out where you spend the most and then find a credit card that will give you more cash back, miles or points based on the category you spend the most,” she recommended.
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It Rewards You
Your best friend celebrates you as you reach milestones. Similarly, a credit card rewards you with cash back, points and miles for travel on the purchases you’ve made.
However, Woroch said, you receive these rewards only when you pay off the balance. Just as true friendships are built on respect, a healthy relationship with your credit card means being mindful of your spending habits. Don’t spend more than you can pay off or max out your card.
Punctuality Matters
Mature friends don’t flake out, especially when you made a commitment.
Once you’re issued a credit card, it’s important to respect the due dates for bills and make your payments in a timely manner. Failing to do so, Woroch said, can lead to paying penalty APR fees, which can get as expensive as 30%.
It Helps You Build Credit
If you use your credit card responsibly, you are doing more than keeping yourself out of debt. This habit helps you build and strengthen credit.
As you continue to make payments on time and maintain a low balance, your credit score will continue to improve. In time, this leads to lower interest rates and better loan approvals, according to Juan Londono, branch manager at Affinity Federal Credit Union in Norwalk, Connecticut.
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It Can Protect You
Londono said using a credit card can be a shield against bogus charges.
“You’re safeguarded against unauthorized charges,” he said, “plus many cards offer features like instant freeze/unfreeze, extended warranties and purchase protection.”
It Can Be Plan B in Case of Emergency
Instead of dipping into your 401(k) or cashing out investments to pay for emergency expenses, Londono said your credit line can act as a safety net. Just be careful to pay off whatever you charged in full and to replenish your emergency fund afterward.
You Can Cut Ties With Toxic Rates
Like some friendships, credit cards can become toxic over time. While this type of breakup is never easy, you should feel empowered to surround yourself only with credit cards that work for you, not against you.
Woroch uses the example of credit cards where high interest rates make it impossible to pay off the balance. If you find you’re in a similar situation, she recommends getting a balance transfer credit card that offers 0% interest for 12 to 21 months. This allows you to pay down accumulated debt and get ahead of your finances.
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Take Advantage of Tools To Budget Better
Don’t forget to review all of the financial tools associated with your credit card, like spending alerts and expense tracking. Utilizing these tools can result in becoming a smarter spender and budgeter.
Don’t Rush Into It
You might have found more than one credit card (and sign-up bonus) you like and want to apply for all of them at once. Rather than rushing into this, Monfared said to be strategic about the new credit cards you want to open.
“Too many applications in a short time can look risky to lenders, which can negatively impact your credit score,” she said. “Make sure the card aligns with your spending patterns and you haven’t recently opened other accounts around the same time.”
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This article originally appeared on GOBankingRates.com: 10 Ways Your Credit Card Can Be Your Best Financial Friend
