To use credit wisely, it's good practice to limit yourself to only one active credit card at any given time. Whenever possible, use the card not for extended credit but as a convenient way to shop. To do that, it's simply a matter of using the card for purchases but to then pay the total balance at the end of each month. Having only one active credit card will simplify record-keeping and reduce your expenses. To choose the source of your credit, shop and compare. Creditors, banks, and lending agencies vary greatly. At the very least, you want the lowest annual fee and interest rate should you find it necessary to maintain an extended credit balance.
MONITOR YOUR EXPENDITURES
Keep careful records of your expenses by saving receipts and canceled checks. Then review them at the end of each month to assure wise use of available funds. With limited funds, expenditures must be prioritized. You must decide which expenditures are necessary and which are luxuries. If you must make purchases with extended credit, they should be limited to necessary and large purchases that will outlast your payments on them, such as refrigerators, washing machines or automobiles. Use of credit for everyday items, such as food, clothing or cosmetics, should be avoided.
MAKING CREDIT MANAGEABLE
When using credit you are wise to follow a financial plan designed especially for your lifestyle and circumstance. Such a plan designed around your income and expenses will give you a realistic budget to follow. It will establish guidelines for your personal use of credit and help to assure a sound financial future.
In most cases, a safe and comfortable debt load, excluding rent or mortgage, should not exceed 20% of your monthly take-home pay. This will allow you to balance your debt repayment with your monthly living expenses and also permit accumulation of savings. You will then be living within your means and be using credit wisely.