When used strategically, John, credit cards can be a useful tool to help you build credit, earn rewards, pay off debt or finance a purchase you can pay off over time.

But if you’re not careful, a credit card could also lead to high interest charges, increasing debt and a ding to your credit health.

We’re here to help you uncover the many benefits to keeping a credit card in your wallet. Plus, we’ll give you some useful tips on how to maintain healthy credit card use.
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Juggling debt on multiple credit cards?

Pay more than the minimum

Sometimes it can be tough to pay the minimum amounts due on your credit cards every month. But if you find yourself in a position to pay a little extra and do so as often as you can, it can go a long way toward reducing your overall debt.

Here’s how it works: If you’re able to pay more than the minimum, whatever extra you can afford may be applied toward the principal balance rather than toward accrued interest. This means that you’re working to reduce the amount due, which may help you pay it off faster. When it comes to applying extra funds to combat your debt, you often hear of two popular strategies: the snowball method and the avalanche method.

1. Snowball method — You make your minimum payments on all of your credit cards. Then, you focus all of your extra money on paying off the card with the smallest balance. Once you pay that card off, you take the money you were paying for that card and put it toward the card with the next smallest balance. This strategy is good for people who need a little extra motivation to stay focused.

2. Avalanche method — You still make your minimum payments on all of your credit cards, but with one major difference. You use the extra cash to pay off the card with the highest interest rate. Once that card is paid off, you apply your money toward the card with the next highest interest rate. This strategy is good for people who want to save more money on interest charges.
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How late payments can affect your score
It depends on how much you owe and how late your payment actually is, but there’s no getting around it: late payments can hurt your credit.

Here are some things you might encounter after making a late payment on a credit card or other line of credit.

You could be charged a late fee. If you pay your credit card bill a single day after the due date, you could be charged a late fee, which will be reflected on your next billing statement. If you continue to miss the due date, you can incur additional late fees.

Your interest rates may rise. Paying your creditors late may result in an increase in your interest rate, often resetting your interest rate to a penalty (or default) APR. If you have a promotional 0% APR on a balance transfer credit card, paying late may also forfeit your 0% promotional rate and reset it to the default interest rate.

It may end up on your credit reports. If your payment is more than 30 days late, the two major credit bureaus are usually notified, meaning the late payment will show up on your credit reports. A late payment could stay on your credit reports for up to seven years.

It might decrease your credit score. Payment history is a very important factor in calculating your score. Just one late payment can lower your credit score, especially if you have a good or excellent credit score. Depending on how late your payment is, how frequently you pay late, how much you owe, and what your credit score is, late payments can really affect your credit.

The consequences of making a late payment can feel harsh. But don’t let it discourage you from working toward future financial goals. Your credit score can bounce back with time, hard work and patience. The best thing you can do is start working on rebuilding your on-time “payment streak” if possible — even if that means making the minimum payment each month. Making more and more on-time payments and actively reducing the amount you owe can diminish the impact on your score over time.

And, as best you can, don’t let future payments become delinquent or get sent to collections. An account reported in collections could stay on your credit reports for up to seven years and cause even more damage than a late payment.
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