Reader Q & A: Dealing With Credit Cards

I often receive emails from the Studenomics community with specific questions and comments. I do my best to respond appropriately to every email. Sometimes I have the perfect answer. Other times I do a little research and I find the answer. Then there are simply times where I just point the reader towards another website.

For the past few years I’ve been checking out the reader mailbag over at The Simple Dollar every Monday morning. I figured for all of the questions that I can answer appropriately/the ones where I can easily research the answer, I will have a Reader Q & A every week.

Your fellow Studenomics reader, Vincent I. wrote in with the following question: (note that questions are edited to protect the readers privacy)

My long term girlfriend and I have decided to move in together. We plan on purchasing a piece of property within the next year. Everyone around me is stressing me out about my credit score because I don’t really use my credit card. How can I use my credit card to improve my credit score?

Routine purchases.

We all have routine purchases that we make on a fairly consistent basis. Why not setup an automatic payment with your credit card? This is will help you to slowly build your credit score because it’ll prove that you’re responsible since your expenses will always be covered on time.

Major purchases.

Do you have a group trip coming up? Does someone in your family plan on purchasing a brand new tv in the very near future? I always make it a point to cover major expenses with my credit card. This is the main reason I have a high limit on my credit card. It’s also been helpful to me building my credit score over the past few years.

Of course you must be very careful here. There’s a fine line between paying for major purchases and going into debt. When I pay for a group trip, I ensure that I have all of the money upfront (including my own costs). This process is really easy to mess up. This is why I really want to stress the caveat that major purchases should only be made with your credit card when you have the cash on hand and ready to simply transfer to your credit card.

Bills.

I’ve setup my cell phone and gym bill to be directly charged to my cell phone. This simplifies my financial system and it allows me to spend less time on my finances. This isn’t a groundbreaking strategy to improve your credit score, but it’s a sound financial habit that is worth implementing.

Another caveat that I want to mention for automated bill payment– always look over your bill. Just because you have automatic payments setup, this does NOT excuse you from going over your bills. My cell phone bill comes to my email inbox, where I review it for any discrepancies. I’ve been credited money to my credit card in the past because my cell phone provider made a minor error. I would’ve never found this error if I didn’t go over my phone bill.

Don’t use a credit card at all.

I’m not trying to contradict myself. If you’re not comfortable with using a credit card then don’t use one. There are other ways to build your credit score that don’t require you using your credit card all of the time. The methods mentioned above can improve your credit score– BUT many novice credit card users can make a minor or major mental lapse that could cost lots of money.

Please send in any questions you may have to md at studenomics dot com (had to spell it out to battle all those fun spam bots!). I will answer any questions related to anything. I mean ANYTHING– money, school, life, dating, banking, etc.

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