Anyone can build credit, while managing their finances, with a credit card. Consumers should be well-informed about credit cards so that they can make the right decisions. The piece that follows includes credit card fundamentals aimed at helping consumers make smart decisions about their finances.
Don’t fall for the introductory rates on credit cards when opening a new one. Be sure to ask the creditor what the rate will go up to after, the introductory rate expires. Sometimes, the APR can go up to 20-30% on some cards, an interest rate you definitely don’t want to be paying once your introductory rate goes away.
Try your best to stay within 30 percent of the credit limit that is set on your card. Part of your credit score is made up of assessing the amount of debt that you have. By staying far under your limit, you will help your rating and make sure it does not start to dip.
Always make sure there is not a yearly fee attached to any credit card that offers rewards or perks. If you are the owner of a platinum card, or a black card, the annual fees can be up to $1000. Unless you have some specific need for exclusive credit cards, remember this tip and save yourself some money.
To make the best decision regarding the best credit card for you, compare what the interest rate is amongst several credit card options. If a card has a high interest rate, it means that you will pay a higher interest expense on your card’s unpaid balance, which can be a real burden on your wallet.
Do not forget to factor in your credit cards when creating a budget. Many people think a budget is only for the bills you owe; however, you should also set a budget for credit card usage. You should not think of a credit card as simply extra spending money. Figure out a set amount that you’re comfortable with setting aside to make payments on your credit cards every month. Ideally, you want this to be an amount that you can pay in full every month.
If you lose your job, let the card company know. If you are at risk of being unable to make payments in a timely manner, the credit card issuer will usually try to arrange a payment plan that you can stick to. This could help because they may not end up reporting your late or missed payment to the credit agencies.
It is important for people not to purchase items that they cannot afford with credit cards. Just because an item is within your credit card limit, does not mean you can afford it. Make sure anything you buy with your card can be paid off by the end of the month.
Always know what your utilization ratio is on your credit cards. This is the amount of debt that is on the card versus your credit limit. For instance, if the limit on your card is $500 and you have a balance of $250, you are using 50% of your limit. It is recommended to keep your utilization ratio of around 30%, in order to keep your credit rating good.
It is best to stay away from charging holiday gifts and other holiday-related expenditures. If you can’t afford it, either save to buy what you want or just buy less-expensive gifts. Your best friends and relatives will understand that you are on a budget. You can always ask ahead of time for a limit on gift amounts or draw names. The bonus is that you won’t be spending the next year paying for this year’s Christmas!
If you are going to make purchases over the Internet you need to make all of them with the same credit card. You do not want to use all of your cards to make online purchases because that will increase the chances of you becoming a victim of credit card fraud.
A great way to save money on credit cards is to spend the time necessary to comparison shop for cards that offer the most advantageous terms. If you have a decent credit history, it is highly likely that you can obtain cards with no annual fee, low interest rates and perhaps, even incentives such as airline miles.
It is very important when you get a credit card to keep the account open as long as you can. Unless you have to, don’t change accounts. This can have a direct effect on your credit score since length of history with a creditor is a factor in the scoring process. A key trick to establishing solid credit is to keep accounts open for long periods of time.
Know what recent credit card laws have been created recently. For example, it’s now illegal for a credit card company to retroactively increase rates. Another example of something that credit card companies are prohibited from doing, is double-cycle billing. Educate yourself about credit card laws. Two legislative changes have occurred that need to be noted, including the CARD Act.
Keep the total number of credit cards you use to an absolute minimum. Carrying balances on multiple credit cards can complicate your life needlessly. Shift your debt onto the card with the lowest interest. You will be able to keep better track of your debts and pay them off faster if you stick with a single credit card.
As you can see by now, credit cards can be helpful for building credit and becoming financially responsible. It is important that you understand everything about your cards, because that will lead you to make better decisions where they are involved. Having a good understanding of the basics related to credit cards can help consumers make smart decisions in using their credit cards.
