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CreditCard Tips

AreYou Ready For a Credit Card? You may already have a credit card,but if you don't, you can be sure there will be many opportunities toget one.

Like loans, using credit cards can help you build a positivecredit history. This can enhance your ability to receive a private studentloan, buy a car, rent an apartment, get a job, and eventually, try tobuy a house.

Last Updated - 30th September 2005

The Advantages of Credit Cards

Security in emergencies

Reduced need to carry cash or checks;

Enhanced personal responsibility and independence.

There are many advantages to having a credit card such as beingable to purchase items online and make hotel and car reservations.The way you handle your purchases should be taken seriously.

How Credit Cards are Billed

Unlike repayment on a traditional loan, such as a student or carloan, credit cards do not allow you to spread the amount you owe overa fixed period of time. Instead, you are required to make a minimummonthly payment, which is the smallest amount you can pay and stillmeet your cardholder agreement (the terms you agree to when signingup for the card).

The minimum payment is usually 2 percent of your outstanding balance.Unfortunately, by paying only the minimum each month instead of payingoff your entire balance, your debt will continue to grow. Many creditcard companies also charge late fees (usually 2 percent of the outstandingbalance), and higher interest rates on cash advances.

When making your decision about a credit card,ask yourself the following:

Do I need a credit card?

Can I afford a credit card?

Will I be able to pay off my balance each month?

If you decide to apply for a credit card,be a smart consumer and shop around. Look for a company that offersthe following:

Low interest rates or finance charges (combined, they are calledAPR)

Low or no annual fees

A grace period (time during which no payments are due) before financecharges are posted

Other benefits including purchase warranties, free gas, airlinemiles, etc.

Helpful Hints on Using Credit Cards

Credit cards can be helpful in emergencies or if you are able to payoff the balance each month, but be wary! Credit cards can also get youinto trouble. Here are some helpful hints on using credit cards:

Watch out for carrying balances. Some cards charge 20% or more ininterest. (Interest is usually called "Finance Charges"on your statements.)

Look at your statement carefully and call the company right awayif you have any questions.

There is usually a large finance charge for cash advances and interestbegins accruing as soon as you take the money out, not after the nextstatement closing.

Be aware of annual fees.

Watch out for introductory offers! When you receive a credit cardoffer in the mail with a low rate, it may expire in three or six months.Note when and by how much the rate increases after the "introductoryoffer" expires. You may not remember when it expires, but thecard company will.

Think about your purchases. If you are not able to afford the purchasenow, chances are you won't be able to afford it in a month when thecredit card bill comes in!

If you get behind Cut your recreational expenses.

Call your credit card company. They may be willing to work out arepayment schedule with you

Develop a budget and stick with it! Everyone makes mistakes, butdon't prolong yours. Bad credit will follow you and hurt your chancesfor mortgages or loans down the road.

Look into credit counseling services. Many offer educational programsor individual counseling sessions to help you get back on track.

Credit cards are just like a loan-you have to pay what you owe -so try and not overcharge more than you can afford to pay.

Keep track of how much you spend on your credit card. Remember thatincidental and impulse purchases add up fast.

Save your credit card receipts. Compare them with your monthly bill.Promptly report problems to the company that issued the card.

Never lend your credit cards to anyone.

Owing more than you can repay can damage your credit rating. Thatcan make it hard to finance a car, rent an apartment, get insuranceor even get a job.

Pay your credit card bill on time, and in full when possible. Ifyou don't, you'll have to pay finance charges on the unpaid balance-andit takes forever to get caught up if you just pay the minimum.

Balance Transfers
Reduce your monthly repayments for 6 months (typically - will vary withcard issuer). Consider:

Is there a charge for transferring? Usually 1% with a minimum feeof about £2.

What is the %APR once the %0 rate finishes?

What is the % balance monthly repayment? This can vary from 2% to5% of your outstanding balance. If low repayments are a priority then2% sounds attractive, but you normally pay a higher %APR for thisprivilege.

Low Rate Balance Transfers
A credit card issuer may offer a permanently low interest rate on balancetransfers. If you have a large outstanding balance which you cannotrepay within the 0% period offered by other card issuers then this optioncan save you money. You must calculate your repayments and decide.

Interest Free Credit Cards
Typically 6 months interest free period for purchases. Useful if youwant to make a major purchase. If you do not expect to pay off the balancewithin the interest free period then check the regular interest rate.

Cash Back Credit Cards
If you normally pay your credit card balance in full every month thenthere are some good deals about. Rewards can be in the form of air miles,points, or cashback. %APR do not tend to be the lowest with this typeof card.

Disclaimer: The Credit Card Tips / Informationpresented and opinions expressed herein are those of the authors anddo not necessarily represent the views of TipsAndTreats.com and/orits partners.

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