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Campbellville - How to manage credit cards to help build your credit score

Campbellville - How to manage credit cards to help build your credit score

Is there an ‘ideal’ way to manage credit cards or a recommended speed to pay them off to help build your credit score in Campbellville? This was a question we were asked yesterday by a client applying for an auto loan.

It isn’t a question we hear that often so that prompted a little work on our part to answer. Our Campbellville car loan team did the honours.

Credit cards and credit scores

Let’s not bury the headline. There is an ideal way to manage credit cards and we’ll walk you through it here. We would separate it from your credit score though. While your score is important, effectively managing credit cards saves you money.

We consider that much more important than a credit score!

Managing credit cards in Campbellville

The recommended way to manage credit cards is to use them sensibly and pay them off in full at the end of each month. Don’t use them to buy things you don’t need or be tempted to lean on them for instant gratification.

Use them for daily expenses like groceries or gas and pay off the balance in full every month.

Minimum payments

Set up an automatic payment to the credit card company so the minimum is always paid. This should help protect you from missing a payment.

But. Don’t just depend on a minimum payment. Even a modest debt can take forever to pay off if you stick to the minimums.

For example, say you have $2,000 outstanding on a credit card at 19% interest. A minimum payment of 2% would take almost 38 years to pay off and cost you over $4,500 in interest!

Minimum payments should only be viewed as a catch-all, to prevent you forgetting to make the payment through being busy or work. You should never depend on them to service the debt.

Balance transfers

If you do have substantial credit card debt, you can use balance transfer deals to save interest. There are lots of them around and will often charge a small fee to use.

Apply for zero percent transfer card, transfer your balance and pay off as much as possible before the zero percent period ends. Then repeat, paying off as much as you can while you can.

If you time it right, you will pay minimal interest and a modest fee to use the card. If you don’t plan on using the card afterwards, settle and close the account.

All this activity will gradually help increase your credit score anyway. You don’t have to worry about your score with credit cards, it’s the interest that will cost you. Follow the tips above and you could reduce your interest liability significantly!

If you need help or advice on anything to do with car loans in Campbellville, contact Car Nation Canada today, we can help!

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