You don’t have to be a financial superstar to know that debt is bad. You hear it from all sides — from financial pundits on tv talk shows to know-it-all friends who like to hand out life lessons.
But sometimes, debt is unavoidable. It helps you make some of life’s biggest purchases, and it acts as a safety net when your savings fall short of essential, unexpected repairs.
Managing your debt well becomes key to leveraging it in your favor. If you plan on getting a personal line of credit soon, check in with these tips below. They share the best ways to use your line of credit (LoC).
Tap into It Sparingly
An LoC isn’t a stand-in for your piggybank any time you want something new. It’s meant to help in special circumstances.
So what does this mean? The experts at CreditFresh recommend only using something like the CreditFresh Line of Credit by CBW Bank if your savings fall short of unexpected emergency auto repairs, home maintenance, and medical bills.
As for a last-minute vacation or cosmetic renovations, these things are better left on the backburn until you have enough savings set aside.
Review Your Records
With most LoCs, you’ll receive a bill once a month itemizing your purchases, your fees, and your total owing.
It’s easy to get into a habit of scrolling down until you get the amount due and ignoring everything else on the bill. But you’ll want to read over every line in your bill.
Reviewing your bills regularly comes with the following three major benefits:
- Track Your Spending. You’ll get insights into how you spend your money, which may help you budget better.
- Catch Errors. Clerical errors and computer glitches may result in the wrong charge applied to your account. Check this out to find out how to remove them.
- Spot Fraud. If you can’t account for purchases listed on your bill, you may be a victim of fraud. Follow these instructions to undo the damage.
Pay More Than the Minimum
Another item you’ll see on your bill is the minimum payment. This represents the least amount you have to pay to keep your account in good standing.
A chance to pay less than you need is tempting but try to avoid using it except in extenuating circumstances. Making the minimum payment simply delays paying off debt, and you may accrue interest and other finance charges until you pay it off entirely.
Paying your full balance — or paying as much as you can possibly afford — helps manage your debt and reduce interest.
Managing Your Debt Responsibly is Possible
Taking on debt isn’t always what you want to do, but in certain emergencies, it’s something you have to do. Following these guidelines can help you manage these debts responsibly, so you might reap all the rewards of an LoC and none of the consequences.