Original Source: https://www.discover.com
Five Tips to Using a Secured Credit Card Wisely
Your secured credit card has arrived, and you’re itching to begin building good credit. Before you do, read on for tips on using a secured credit card wisely.
If you have little or no credit—or just plain poor credit—buying a house or a car, or applying for an apartment, might seem like a monumental task.
The good news? By using a secured credit card, which uses money you place in a security deposit account as collateral, you can build your credit with responsible use in several meaningful ways*—as long as you follow a few rules.
1. Use for Small Purchases You Can Pay Off Each Month
The point of using a secured credit card is to show your ability to responsibly charge and then pay off your balance. To do this, make a few purchases each month and pay your bill in full and on time. By not carrying a balance, you not only avoid paying interest on purchases, but are using a time-tested strategy for building credit.
2. Pay on Time, and More Than the Minimum
While making your minimum payment on time is one essential element to a healthy credit score, upping that payment each month has added benefits. Among them: helping to pay off more of your balance, which can show that you aren’t able to properly manage your money, and reducing your credit utilization ratio, or the amount you owe compared to your credit limit. Both are factors that affect your credit score.
3. Make Multiple Payments
Making more than one monthly payment can help keep your balance continually low. This is important because even if you pay in full each month, you can’t be sure when your credit card issuer will send your report to the three credit agencies, and a large balance reduces your overall credit, which can negatively affect your credit score. You may also choose to send a payment after a heftier-than-normal purchase.
4. Set Payment Alerts
Even the most organized person misses a payment now and then. But when you are trying to build credit, that’s one time too many. Avoid this scenario with payment alerts that remind you of your bill’s upcoming due date. You may choose to set up a “Payment Due” alert with your issuer, and be texted, or manually put together a monthly “alarm” that notifies you a week before your bill is due.
5. Enroll in Auto-Pay
Still concerned about making your payment on time? Perhaps the easiest plan is to enroll in auto-pay, which allows your issuer to automatically deduct the monthly balance from your bank account so you don’t have to keep track of bills.