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By Sally McMullen | Journalist at finder.com.au

Getting a credit card is a great way to increase your financial freedom while building your credit history. However, if you use your card incorrectly, this could have negative effects on the health of your credit history. To help get your finances in shape, we’ve highlighted three tactics that you can employ to help become financially fit and healthy sooner.

 1. Set yourself a monthly budget 

It’s no secret that a line of credit could tempt you to overspend. A credit card can help free up your cash flow, but you need to remember that you have to repay everything you charge (plus interest in many cases).

That’s why it’s important to stick to a budget each month. You may have a maximum credit limit of $10,000, but that doesn’t mean you need to spend up to that amount. Instead, you should consider your income and your liabilities and calculate exactly how much you can afford to repay each month. Ideally, you’ll want your credit card budget to be an amount you can repay each month so that you can avoid paying interest.

You can allow wiggle room for your budget in case of emergencies or planned increased spending (such as around Christmas or a birthday), but sticking to your budget will ensure that you’re not hit with any nasty surprises when you receive your credit card bill.

You can use the finder budget planner to calculate your budget based on your income and monthly expenses. 

2. Make timely repayments and pay more than the minimum repayment amount 

Sticking to a budget will make it easier for you to pay your credit card bill each month. Each statement period, you’re required to make a minimum repayment (which is usually between 2% and 10% of your total balance, depending on the card issuer) by a set due date.

While paying the minimum repayment will help you to avoid late fees and keep your account in good standing, it’s wise to pay more than just the minimum amount each month. 

If you have a $3,000 debt and you only pay the 2% minimum repayment of $60, this will leave $2,940 in your account to collect interest. Not only will it take you years to pay off your debt, but it will also grow with interest and it’s likely that the interest costs could exceed the amount you initially had to repay.

It’s ideal to pay your balance off in full each month, but even paying as much as you can will still help you to reduce the total amount of interest you are charged.

You can use this credit card repayment calculator to see how long it will take you to pay off your debt if you make only the minimum repayments. You can also use it to calculate how much time and money you’ll save by making larger repayments.

Finally, check out Finder's guide on credit card repayments for more tips on how to manage your monthly bill. 

3. Regularly compare your options 

Even if you signed up for what you thought was a competitive deal at the time, it’s important to stay on top of current credit card offers. You don’t want to switch credit cards too often, but the convenience of staying with your current bank and card for years at a time could cost you.

If you stick with the same card, you could find that you’re paying higher annual fees or interest rates than you should or you could be missing out on extra features. As long as you’ve repaid your balance in full and your account is in good standing, there’s no reason why you shouldn’t compare your options to find a better deal.

Compare cards based on interest rates (including 0% interest promotional offers and standard interest costs), annual fees and card features such as rewards programs, bonus points and complimentary extras.

If you’re struggling to repay your credit card because of a high interest rate, it might also be time to consider conducting a balance transfer to consolidate your debts onto a new card with a promotional 0% interest rate.

Use the credit card comparison tables on finder to view current card offers side by side and make a more informed decision.

While the best credit card practices will vary depending on your individual circumstances and lifestyle, sticking to a budget, aiming to clear your balance and regularly comparing your options are three simple ways to keep your finances in good shape.

Important information

Information on this website is general and has been prepared without taking into account your objectives, financial situation or needs. You should consider whether this information is suitable for your objectives, financial situation and needs before acting on the information provided.