Credit cards may have used to give the impression that by charging on the card, that you don’t have the money to pay for the items. While I guess that may be true for some, and to why debt is created, but there actually can be benefits to using a credit card such as fraud protection, not to mention the rewards that you can earn just by making the normal purchases that you would be making anyways. Beyond that, hopefully that can clear up a few myths that exist about cards as well.
Carrying a Balance Helps Credit Score
While it is important to charge on your account and pay the full statement balance by the due date to create a solid payment history, it also avoids having to pay interest by carrying over a balance. What carrying over a balance doesn’t do is help your credit score though. The more you close in toward your available credit, the lower your score will be, so in order to help your credit score you will need to increase the difference between balance and available credit. I wouldn’t recommend carrying one on a store card like a Victoria’s secret credit card, but perhaps a zero interest Visa or Mastercard, as there are many!
Closing Credit Accounts at Zero Balance
Paying off debt is a huge accomplishment, which could take years to get to that point, so much in fact that once you finally see a zero on the balance your first instinct may be to close the account so you don’t have to risk charging up the account again. This may actually hurt your score if you have a balance on other cards, as it will reduce your overall available credit. It could actually help you to keep the account open, but cut up the card so you don’t use it anymore, but at least it will still be open to factor in your score.
Don’t Accept a Credit Line Increase
While yes, if you get your credit report pulled while filling out an application for credit it can lower your score by a few points, there is no harm in accepting a credit line increase if your current credit account is offering. There is only good that can come out of it by increasing your available credit and can actually increase your score at the same time. The only problem is you have to make sure you don’t go on a spending spree now that you see you have virtually an endless amount of money at your disposal.
A Debit Card is All You Need
Debit cards are great as a way to budget your money throughout the month because you can only spend what you have in your account, and once you run out of money you’re done until next paycheck. While this may make financial sense to you, if you are hoping this will improve your credit score because you see a credit card logo on your debit card, you are mistaken. Using your debit card will have no impact to your credit score one way or another, as your bank account has nothing to do with your credit report.
If saving money is what you need, look to see where you can cut expenses. Spending money, whether its a debit or credit card is irrelevant. For example, if you spend a lot at the gym and on supplements, sign up now with a Groupon coupon code, and you will receive free bars and shakes to get you started. And there are more codes you can apply that will save substantial amounts off subscriptions that are right for you. Just use the app on your smart phone and sign up today.