Credit Cards

3 reasons to use your credit cards less in 2022

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It may be time to put away your credit cards and start paying with cash.

Key points

  • Paying for purchases with credit cards means racking up rewards and cash back.
  • Despite those benefits, in certain cases, it might be worthwhile to temporarily cut back on credit card use.

Charging expenses to a credit card can be a smart financial move. Credit cards generally reward you for purchases you make through points or cash back. That is effectively free money to buy the things you were already planning to buy.

But sometimes, it’s worth keeping your credit cards in a safe place and temporarily stop using them, or reduce their use. If these situations apply to you, you may want to use your credit cards less often in 2022.

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1. You already have a giant balance to pay off

There is nothing wrong with charging expenses to a credit card and paying them every month. But if you have a giant pile of credit card debt, the last thing you want to do is add to it. And if that’s the case, you’re better off relying more on cash in the coming months, while you work to pay off your existing balances.

The tricky thing about credit cards is that unless you log in and check your balance often, you can end up overspending. On the other hand, if you have to physically hand over cash for the purchases you’re making, you can more easily signal your brain that you need to cut back on purchases, at least until your next paycheck arrives.

2. Your credit card interest rates are high

Credit cards are notorious for charging high amounts of interest. If you usually end up carrying your balances over from month to month, and you also have a bunch of credit cards with exorbitant interest rates, then that’s reason enough to cut back on card use this year and start relying more on cash. .

3. You are trying to improve your credit score

The higher the balance you carry on all of your credit cards, the more damage you could do to your credit score. An important factor that goes into calculating your credit score is your credit utilization ratio. That ratio measures how much available revolving credit you’re using at one time.

A ratio above 30% could lower your credit score, making it harder to get an affordable loan when you need one. So if you’re looking to boost your credit score, either because you generally need work or because there’s a specific loan you want to apply for this year, then it might pay to cut back on credit card use.

Imagine you have a total credit limit of $10,000 and you owe $3,000 on your various credit cards. That means you already have 30% utilization, and going higher could quickly drag your credit score down. That alone is a good reason to use your credit cards less often for now.

While credit cards are a useful financial tool, they can also open the door to additional spending, costly debt, and credit damage. If these circumstances apply to you, it might be worth turning to cash more this year and increasing your use of your credit card once your financial picture looks a little healthier.

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