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Choosing the Right Credit Card Can Help Credit Histories

Learn About Credit HistoryMillions of Americans are suffering from lower credit scores due to prolonged unemployment, mortgage problems, and delinquent payments to lenders. This problem is compounded by recent reports that more Americans are using their credit cards just to meet their monthly bill requirements. Many use these cards to pay their monthly utility bills, insurance payments, and mortgages, a strategy that has led some to rack up more debt than they can handle.

Many of these struggling consumers could benefit by understanding their spending habits and choosing the right credit card to help them with these payments.

A lot of consumers make these charges on a card with a high interest rate. This can lead to extra debt, because keeping a high balance on these accounts will result in a higher accrued interest amount each month. Many consumers in recent months have also experienced charge-offs — debt that lenders deem uncollectable — on bills that are more than 90 days late. As a result, these individuals could see their credit suffer quickly.

According to recent statistics from FICO, the originator of credit scores, if you have a 680 credit score, a 30-day late payment can drag it down 60 to 80 points, Forbes reports.

Consumers forced to pay their bills with credit cards may want to consider taking out a new credit card with a lower interest rate. Over the past few months, lenders across the country have been mailing more credit-card offers, and by examining them and reading the fine print closely, individuals may find more attractive rates.

In addition, many new credit-card offers feature low balance-transfer fees. These charges — which apply when a consumer transfers debt from one credit card to another — usually range from one to five percent. However, consumers could benefit by switching to a newer card that has a small balance-transfer fee and a lower interest rate. This would save them money in the short term and ensure that their balances don't build up even higher levels of interest-payment debt.

Consumers might also find added savings by taking advantage of rewards cards. These cards can offer as much as one- to two-percent cash back on purchases, although they may have other incentives tied to spending in some cases. For example, many recent offers come with cash benefits for those who spend a certain amount within the first few months that the account is open.

As an added benefit, some come with greater rewards for gas or grocery purchases. Consumers can use the cash-back bonuses received from buying these goods to help pay their other bills.

Some lenders may even allow these benefits to be traded in for cash back, and consumers who want to maximize their rewards should thoroughly research the various card offers and choose the one with the most flexibility.

Many lenders also allow automatic online payments to be made through their websites. While these can be convenient for consumers trying to meet their monthly requirements, it can be easy to forget about these services. Consumers should find ways to remind themselves that they're enrolled in such a program, to avoid running the risk of making charges to a specific account that's already be maxed-out.

By taking the time to understand their monthly spending and bill-payment processes, consumers can reduce the chance of a missed payment and thereby save their credit reports from further blemishes.

Over time, choosing the right credit card for a specific budget will help a consumer's finances and increase the chances that a credit issuer will view him or her favorably for a new insurance policy, credit card, or loan.

 

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