By HRRC Financial Counselor Keesha Allen. Using credit cards wisely should be an important goal for everyone. Unfortunately, many people with credit cards do not understand how they can impact other financial areas, and this can lead to a slew of problems.

Proper use of your credit card will improve your credit score. This number will determine the interest rates you will be charged on things such as credit card balances, loans and mortgages. A better credit score will save you from excessive and unnecessary costs.

In addition to avoiding late fees, making credit card payments on time will help you maintain your credit score. If you choose to make your payments manually, set up reminders for when your billing cycle ends to ensure you mail your check on time. An alternative to paying manually is to set up automated payment with your credit card company, which will help ensure you won’t be penalized for late or missing payments.

It’s strongly recommended that you do not just pay the minimum amount required on your monthly bill. If possible, pay the full amount due at the end of every billing cycle. Credit card companies are notorious for charging high interest rates on any running balance on credit card bills. Additionally, most people in credit card debt usually get there by only making the minimum required payment every month. By paying off your entire balance, you won’t fall into that trap.

It’s also important to avoid maxing out your line of credit. The ratio of your credit balance to your credit limit (known as credit utilization) is another key factor in determining your credit score. Experts recommend that you keep your balance below one third of your credit limit. That means that, in months when you know you will be exceeding this threshold, you should consider paying off a portion of your balance early in order to maintain a favorable ratio.

Keesha Allen, HRRC financial counselor, can suggest other ways to improve or rebuild your credit. Call (216) 381-6100, ext. 13 or email tallen@hrrc-ch.org  to schedule an appointment.