Learning how to manage your money while you build your credit can give you the tools to help you be financially successful and prepared for unexpected expenses. And having good credit is becoming increasingly important in today's world. Here are two tips to help you manage your money and build your credit.
Tip #1- Set Up Two Checking Accounts
In a recent survey, it was found 18 percent of Americans do not keep a budget. It is important to learn how to budget your income each month to cover your necessary living expenses. Most banks and other financial institutions offer online account access to make it easier for you to manage your accounts and expenses. Take advantage of this benefit. Then, make sure you have two checking accounts that are linked together through your online customer access. One of your bank's customer service agents can show you how to link the accounts together if you do not know how to do it.
With two linked accounts, you will have the ability to transfer funds freely from one account to the other. Then, you can use one account as your bill payment account and the second account to hold your spending money.
If you are not already using the online bill payment service with your bank, now is the time to set it up. The good part about online bill payment is you don't have to pay for stamps to mail the bills because the money will be taken straight out of your account electronically. Then, in your bill payment account, set up a bill payee for each creditor and utility company you owe money to.
When you get your paycheck, deposit it into your spending money account. Then, add up the total of all the bills you need to pay for that paycheck period and transfer this amount into your bill payment account. Schedule each bill to be paid by its due date in your bill payment account's online bill payer.
The rest of your spending money account can go toward savings, gas, groceries, or doing something fun. It is recommended to put aside 10 to 20 percent of your income into a savings account. Only four out of ten Americans have money set aside to pay for unexpected expenses outside their budget. You don't need to be part of the 60 percent.
Tip #2- Establish Credit Without Paying Finance Charges
Work on building good credit if you don't have any credit or if your credit is bad. And, you don't need to pay interest and finance charges to build and establish your credit. You also don't need to find a zero percent interest rate credit card. You can use any credit card to help build your credit, even if it only has a $100 credit line.
It is best to apply for a credit card that has no annual fee. But, if you are trying to establish your credit, you may have to start with an annual fee credit card until your credit is more established. Later, you can apply for a no annual fee credit card and continue building your credit for free.
Your credit card will begin reporting credit history to your credit report as soon as you begin using the card. So, use the card for small expenses that you need to pay anyway, such as gas or groceries. Then, pay the bill in full each month. You can even set this money aside so you will have it to pay when the credit card bill when it arrives.
The credit card company gives you a grace period without charging you interest if you pay the balance in full by your next due date. For example, use the card to buy $50 in groceries. When you get your bill in the next thirty days, pay the full $50 balance by the due date and you won't be charged interest. Your credit card will report to the credit bureau that you paid your account on time. Your credit report will also show you did not max out your credit limit, which also helps your credit score. A maxed out credit card can lower your credit score anywhere from 10 to 45 points.
These two tips can help you manage your finances and to build your credit without having to pay interest. For more information, you may want to seek advice from a consumer finance center like Financial Guidance Center.