Credit cards are not all bad. They help you build your credit score, reap rewards like airline miles and offer purchase protection that cash and debit cards do not. This is all assuming you’re using your credit cards properly. Here’s how you know if your plastic use is getting out of hand.
To The Max. If you’re constantly maxing out your cards, it’s time to revise your usage. Not only does maxing a card leave you with zero available credit, it makes it harder to pay the full balance, and that can snowball into a big problem. Maxing out your credit cards also can hurt your credit score, as it blows your credit utilization ratio out of the water. The credit utilization ratio is one of the biggest factors that determines your score. If you’re using more than 30 percent of your total available credit, your score will likely suffer.
I Owe What? One sign of credit card use run amok is being unaware of your balance. The monthly bill should not feature any surprises. As USA Today reports, you don’t have to know the balance to the penny, just a rough idea of what you owe. If you have no idea, you’re probably spending too much.
A Reach. The ideal way of using a credit card is to pay the entire balance off every month. That way you’re not getting hit with interest, which can make the next bill even harder to pay. If you’re struggling to pay off the bill in full each and every month, your credit card spending should be reined in.
In The Way. If your credit card debt is getting in the way of your other financial goals, that’s a big red flag. Try your best to only use the credit that you can safely pay off each month. If you do, there will likely be plenty of room in the budget for long-term goals.