We all know that it’s smart to pay off our credit card bills every month. But at times, that’s impossible. And in some circumstances, you may find that you need to make a big purchase that pushes you right up against your credit limit.
This isn’t a great idea unless you have the income, and a solid plan to pay down the debt. But if you must load up a card, we discovered 3 tips to manage credit debt during an interview with Amalgamated Bank’s Eric Ruskiewicz.
Keep your balance under half your limit.
Ruskiewicz says,”For example, if the limit is $10,000 on your credit card keep that balance under $5,000. The idea is not to push your credit up to the maximum level.
When the credit scoring company FICO sets credit scores, it considers the amount outstanding and how close you come to maxing out.
Do not let it get above 90 percent of your limit.
So if you’ve got a $10,000 limit and you have to borrow more than half, don’t go beyond $9,000.
Split your borrowing on two cards.
If you’re making a giant purchase and you absolutely have to use as much credit as possible, it’s wiser to split your borrowing between two cards.
Ruskiewicz says, “If you have $10,000 in credit card debt, you’d be better off with two credit cards with $5,000 on each than having one card maxed out at $10,000.
Know What You Will Have to Pay in Interest
The bills come due, and they come with interest. It’s really important to make sure that you pay the bills on time and you know the terms and conditions of repayment. The Center for Responsible Lending (CRL) points out that banks change their interest rates and they often list the change in the small print. The CRL suggests you:
- Look at your statement carefully every month to see if there are interest rate or other changes.
- If you are 60 days past due, some companies may raise your interest rate.
- Watch out for hidden fees for statements, foreign currency and miscellaneous surcharges.
- Be careful about signing up for a “free” credit card trial period. Fees kick in and interest rates often rise after the trial period and you may not remember that the trial period ended.