Your Finances, Your Future - Facts about Credit Cards

Credit cards are the most common way that people borrow money. By signing up for a credit card, you are signing a contract with the card company. When you make purchases with your card, the card company pays for the purchases, and then you pay the card company by a specific date. How you handle your credit card – paying the total amount due each month, paying the minimum amount due, or paying something in between – has a big impact on your ability to get other types of loans. Learn how to use your credit card wisely. 

TIPS:

• Pay your bills on time. Paying your credit card account on time helps you avoid late fees and penalty interest rates that are applied to your account. Prompt payment also helps you maintain a good credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates;
• Do not exceed your credit limit. You should always keep your balance lower than your credit limit and maintain a cushion in case of emergency. If you go over your credit limit on your card, your card issuer could charge a fee and increase your monthly interest rate;
• Avoid unnecessary fees. Credit card companies not only charge late payment and over-the-limit fees, but also fees for cash advances, transferring balances, and having a payment returned. Some companies charge a fee when you pay your bill by phone. Check out some of the types of fees you can be charged;
• Pay more than the minimum payment. If you can’t pay your balance in full each month, try to pay as much of the total as you can. Over time, you’ll pay less in interest charges – which means more money to spend on other things – and you’ll pay off your balance sooner. See how much extra you pay when you carry a large balance.

TOOLS:

• Shop around. Researching which is the right credit card for you can save you money on interest and fees. Look for one that matches your needs. If you have plans to travel, one that provides frequent flyer miles may fit the bill. But if you are staying put, finding a card without annual fees may be better;
• Check the disclosures. Different credit cards feature different fees, charges, interest rates and benefits.  Even if a credit card looks like a great deal at first, it may not be once you read all the terms and conditions.

TRAPS:

• Credit card fraud. Find ways to protect yourself from credit card fraud;
• Identify theft. Protect your credit card number so that others can’t use it pretending to be you;
• Beware of credit card scams. If it sounds too good to be true, it probably is. Beware of offers guaranteeing credit cards in advance for a fee before you even apply. These offers are illegal and often target people with credit problems.