For millennials who are just learning about credit cards and credit ratings, gaining proper understanding of the different types of credit cards and how they affect your credit rating can help to shape your financial success.

Many people don’t receive enough financial information to avoid common credit card pitfalls. In some cases, they simply make wrong choices because they are not aware of better alternatives. Use these credit card tips to improve your credit score and save yourself thousands of dollars in the future:

1. Pay your balance in full each month to build your credit rating
   One of the most common misconceptions is that paying the monthly minimum and carrying a balance from month to month can help to build a positive rating. However, the credit cards available to new cardholders carry very high APRs of up to 25 percent. If you only pay the minimum, it means that you are spending too much interest on purchases and increasing your debt.
2. Don’t be tempted to max out your line of credit
   With a low paying job and a high cost of living, millennials entering the job market are tempted to purchase everything they need at once and then repay gradually over time. However, overspending and maxing out your line of credit not only signals creditors of your high risk of defaulting, but also affects your utilisation ratio (debt-to-credit ratio), which impacts your credit score. The ideal ratio is 30 percent, which means that you should be more patient about fulfilling all your dreams at once.
3. Get a free credit report and fix any errors
   A credit report is a history of your credit usage that allows you to identify instances where you have overspent or controlled your spending. It gives you a great view of your spending habits and credit usage, and allows you to spot any problems that might raise issues when dealing with a credit agency so you can fix them earlier.
4. Track your spending with apps
   The biggest factor that affects your credit rating is your ability to make payments on time. But it is best if you don’t have to rely on your credit card all the time. Use budget tracking apps to monitor your income and expenditure. Try to spend as less as you can and increase your savings. You can reduce credit card usage by limiting your purchases of everyday use items with the card.

Final note

Millennials should avoid credit card traps that may lead to financial challenges that culminate in bankruptcy. Sometimes, filing bankruptcy for student loans dan provide financial relief. Contact a licensed insolvency trustee today to learn more.