Holiday Credit Tip 5: Don’t Max Out Your Credit Cards

When used properly, credit cards are a great resource to build credit and can help you get what you need, without making cash-only purchases. But remember, a credit card is an unsecured loan, so if you don’t pay off your credit card each month, you will pay interest on the amount you owe. Also, maxing out your credit card – even if you pay off the entirety each month – is not good for your credit score.

So, what’s the “right” amount of credit you should use on your credit card? There isn’t one simple answer, but the smart thing to do is to keep your credit utilization as low as possible – ideally, below 30%.

This holiday, make a plan to be credit smart. Start by creating a budget. And if you’re planning on making all your purchases with a credit card, spread out your purchases over a few months so that you don’t max out your credit card.

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