Humphrey Yang, a personal finance expert who has more than 1.3 million followers on the social media platform, recently posted a clip in which he warns his followers against taking their credit cards for granted. He shows his balance, which reveals that he has an available credit line of over $19,000 and has spent approximately $590 on his card.
“So I’m using about 3 percent of all my available credit,” he says. “And so credit card companies don’t tell you this, but you should never use more than 30 percent. Exceeding that level will have significantly negative impact on your credit score.”
Another piece of wisdom that Yang shares is to avoid paying the monthly minimum payment and instead pay off the full balance if possible.
“If you have $2,000 on your credit card, it would actually cost you double that interest just to pay it off and it would take 152 months,” he says, using an example. “So always pay off your balance in full if you can.”
The clip has since garnered more than 2 million views and nearly 2,000 comments.
“THIS IS SO IMPORTANT,” one person wrote.
“I learned this the hard way,” another admitted.
“Thank you,” a third simply added.
According to NerdWallet, Yang’s suggestion to use less than 30 percent of one’s credit is generally seen as a guideline and not a hard-and-fast rule. The ultimate purpose is to encourage credit card users to lower their usage as much as possible in order to improve their scoring. A 2019 article from CNBC, however, recommends that credit card users aim even lower: between a 5-percent and 7-percent usage.
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