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A credit card and line of credit are convenient financial tools that can help you run a household. But they can become a crutch when you’re living on a tight budget, with huge limits giving you an excuse to overspend. 

Finding a sweet spot where you can tap into all the benefits of online personal credit lines and cards with none of the consequences can be tricky, but there are still ways to make sure you use credit responsibly. Check out these tips to help you use a line of credit wisely. 

1. Have a Plan in Place

Ideally, you only ever charge what you can afford on your credit card or line of credit. 

But let’s be honest — reality doesn’t always work out that way when the car you drive to work won’t turn over one morning. If you want to keep earning a paycheck, you have to get back on the road, no matter what’s in your bank account.

So, if you can’t afford to pay off an unexpected repair by your next billing statement, do the next best thing: pay it off as quickly as possible. Sit down with your budget to see how you can pour more money towards your line of credit and bring down your balance to zero.

This comes with two benefits. 

1. Once you pay off your balance, you’ll have your full credit limit available in another emergency.
2. Carrying over a balance is subject to interest and finance charges. Your plan to clear your balance will help limit how much of these fees you pay overall.

2. Don’t Get Conned by Rewards

Plenty of cards come with amazing rebates and rewards, like cashback on every dollar you spend or deals with affiliated stores. When used correctly, you can leverage these loyalty cards to save a lot more money on everyday items. 

Just be careful you aren’t buying more than you need to unlock these bonuses. It’s a slippery slope that trips up a lot of people. One-in-three Americans overspend on travel to earn sign-up bonuses on specialized credit cards. 

A budget can help you avoid this misstep. Always refer to this spending plan to make sure you can afford to pay off what you owe as soon as you can. If you have to spend more than you can afford to earn points, then it’s not the card for you.

3. Review Your Terms and Conditions

The Federal Reserve has upped interest rates in an attempt to control record-high inflation. While their decision affects the prime lending rate on future short term personal loans, it may have an impact on the credit cards or line of credit loans you have out.

It depends on your contract, so it’s crucial you read the fine print. If you’re not sure about whether your rates will increase to reflect the central bank’s ruling, ask your financial institution for clarity. 

4. Check Your Statements Regularly

You’ll want to check your billing statement every month before you send off a payment. Go line by line to see the charges and costs. This quick check comes with a couple of perks:

1. You’ll see all your spending for the month. This is a good reality check in case you’ve been overspending.
2. A thorough check of your statement also helps you spot and reverse fraud.

If you see an unexpected charge you can’t explain, reach out to your financial institution right away and follow their instructions. 

Managing your line of credit can be simple — just remember these tips.