Before I had a credit card — before I even knew what a credit card was — I knew credit card debt was something to be avoided at all costs. I hadn’t yet graduated from banking of the piggy variety, and my mom already had me thinking about debt. She used my childhood curiosity as a teaching opportunity. She’d be balancing her checkbook, paying bills at the department store or checking out at the market, and when I asked, “Whatcha doin’?” (which happened a lot), something about financial responsibility came up. I figured it was just something accountants did — incorporate money lessons into every day chatter.
It’s a good thing my mom drilled her credit card strategy into me, because unlike many of my friends, I didn’t learn about credit card responsibility the hard way. As it turns out, years of following her own rules got my mom to a near-perfect credit score. She started checking her free scores on Credit.com when I introduced her to the tool, and she’s had a solidly high score for as long as she’s checked. Because her approach proved fruitful, I asked her to share her tips.
1. Pay Your Bill on Time & in Full
Most people understand you need to pay your credit card bill on time, because failing to do so results in late fees. Going more than 30 days past the due date without paying makes your account delinquent and hurts your credit score.
Carrying a balance doesn’t directly hurt your credit score, but if you want great credit, it can be a problematic habit. If you pay your statement balance every billing cycle, you’re more likely to keep your credit utilization low (that’s nearly as important as making payments on time), and you won’t pay interest on your purchases. Credit card debt can grow pretty quickly — here’s a primer on how APR works — and once you get into it, it can be very difficult to climb out.
She’s meticulous about paying any loan bills on time, not just credit cards. If you make one change to your financial behavior, make it timely payments, because payment history has the largest impact on your credit scores, and it helps you avoid costly fees.
2. Don’t Spend Money You Don’t Have
Committing to paying your credit card bill in full holds you accountable for the purchases you make. It can be easy to spend beyond your means when you’re not worried about covering the entire bill a few weeks later, but the “I’ll take care of it later” mindset only adds to what may eventually become a mountain of debt.
When I started using a credit card, I diligently maintained a check register of debits to my checking account, so I knew exactly how much money I had available to pay for whatever credit card purchases I made. I later realized most people don’t manage their credit cards that way, but it’s how my mom taught me to stay on track with credit card spending. Check registers have practically been replaced by online banking and budgeting tools, but as long as you stay on top of your transactions in some way, you shouldn’t have too much trouble avoiding debt.