Learn how to use a credit card correctly and how to avoid common mistakes.
Credit Card Rules to Live By
It is important to know how to use a credit card wisely so that you don’t fall into traps that could lead to debt.
Credit cards are extremely convenient, allowing you to buy now and then pay later. With a credit card you can borrow money up to your limit and then pay it back every month or over time. But understanding credit cards is necessary when you are sticking to a budget and building your credit history. Your credit card has the potential to turn messy and be a danger to your financial health if you make common mistakes. Learn how to avoid mistakes and use your card like a pro.
Pay your balance every month
Credit card balances should be paid on or before the due date. Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.Know your APR and other fees
Some important terms to understand are:
Every card is different so make sure to read the fine print, so your fees don’t start to add up.
Build a solid credit history
If you’re new to the credit card world, getting a card with a low limit or a secured card is smart. Then you can start paying the balance in full and on time every month. This is a great way to establish credit. Using a credit card responsibly can help build you a solid credit history whether you’re a new or experienced card user. This can prepare you for an apartment, a loan, and many other future events.Incorporate your credit card into your budget
Understanding how to use credit cards is a wise part of budgeting and they can be very helpful if you use them correctly. If you need help creating a budget, you can use a budget calculator. This helps tailor your budget to your monthly income and expenses. With a good understanding of your budget, you can better manage your spending and credit card payments.Spend mindfully
Credit cards make it easier for us to make purchases but unfortunately they also make it easier for us to overspend. Focusing your purchases on necessities can go a long way in helping you stay on budget. If you can, schedule out major purchases and plan how you will pay them off. Prioritizing your needs and budget can help you avoid potential debt and keep you with a solid credit history.Understand your rewards
Rewards are a great factor to consider when choosing a credit card and understanding them can help you save money. You can use credit card points to book trips, get cash back, and even buy tickets for events. Every credit card offers a variety of rewards, so it is important to get one that matches with your spending and saving goals.
If you learn how to use credit cards wisely and understand your budget, you can avoid mistakes that lead to debt and reach your goals sooner than you think!
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsem*nt or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.
FAQs
Pay your balance every month
Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.
What is the 2 3 4 rule for credit cards? ›
According to cardholder reports, Bank of America uses a 2/3/4 rule: You can only be approved for two new cards within a 30-day period, three cards within a 12-month period and four cards within a 24-month period.
What is the 3 12 rule for credit cards? ›
Bank of America's 3/12 or 7/12 rule
If you do NOT have a deposit account with Bank of America, your credit card application will be denied if you have opened three new cards in the past 12 months, based on what's visible on your credit report.
What is the 15 3 rule for credit cards? ›
The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date. Proponents say it helps raise credit scores more quickly, but there's no real proof. Building credit takes time and effort.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
What is the 28 36 rule? ›
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment.
What is the 15 3 payment trick? ›
The date at the end of the billing cycle is your payment due date. By making a credit card payment 15 days before your payment due date—and again three days before—you're able to reduce your balances and show a lower credit utilization ratio before your billing cycle ends.
What is the new law on credit cards? ›
New government regulations are slashing the late fees charged by many credit card companies. On March 5, 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule limiting the penalty for late payment to $8 per incident, down from an industry average of $32.
What is the 524 rule? ›
What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
What is the 10 rule for credit cards? ›
Use credit wisely - follow the 20/10 rule
Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items.
The best way to use a credit card is to avoid paying interest by paying off the balance every month on time. Interest rates, known with credit cards as annual percentage rates, apply to purchases, cash advances and balance transfers for most credit cards.
What is the 24 card rule? ›
The 5/24 rule is an unofficial policy that dictates that Chase won't approve you for its cards if you've opened five or more personal credit card accounts from any issuer in the last 24 months. Put simply, the number of cards you've opened in the previous two years will affect your approval odds with Chase.
What is the 30 rule on credit cards? ›
This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.
What is the 20 10 rule for credit cards? ›
The 20/10 rule of thumb is a budgeting technique that can be an effective way to keep your debt under control. It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income.
What is the 2 90 rule for credit cards? ›
1-in-5 rule: This states that you can only apply for one American Express card every five days. 2-in-90 rule: You can only be approved for up to two American Express cards within a 90 day period.
What is the 2 30 rule for credit cards? ›
Two Cards per 30 Days
Data points conflict on this, but a safe bet is to apply for no more than two personal Chase credit cards or one personal and one business Chase credit card every 30 days. However, customers who open multiple cards in less than 24 months, regardless of the card issuer, may be declined by Chase.
What is the 5 24 rule for credit cards? ›
The 5/24 rule, often referred to as the Chase 5/24 rule, is a credit card application guideline implemented by Chase Bank. It states that if you have opened five or more credit card accounts (from any bank) in the past 24 months, you are likely to be automatically declined for certain Chase credit cards.
How to pay off $30,000 in credit card debt? ›
How to Get Rid of $30k in Credit Card Debt
- Make a list of all your credit card debts.
- Make a budget.
- Create a strategy to pay down debt.
- Pay more than your minimum payment whenever possible.
- Set goals and timeline for repayment.
- Consolidate your debt.
- Implement a debt management plan.
On an individual level, the overall average balance is around $6,501, per Experian's data. Other generations' credit card debt falls closer to that average or below. Here's the average amount of credit card debt Americans hold by age as of the third quarter of 2023, according to Experian.
