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Why should I get a credit card?
When you use credit cards correctly, you can:
For more information on Credit Cards visit Cash Course's article Tips for Managing Credit Cards
Terms to Know
Your interest rate is a the fee, stated as a percentage of your outstanding balance, that your company will charge you if you don’t pay your credit card bill in full at the end of each billing cycle.
or Line of Credit
Your credit limit is the maximum amount
of money that the credit card company will let you borrow.
Finance charges include interest and any other fees you might
have to pay for the use of the credit. Some credit cards require
you to pay flat fees in addition to interest. Before you take
out a card, make sure you know what all the charges are.
There are two primary types of credit agreements — 30 day agreements and revolving credit agreements.
In an open 30-day credit agreement, you
promise to pay the full balance owed each month. A popular
credit card that has a 30-day credit agreement is a traditional
American Express. These also are known as charge cards.
Revolving credit agreement
In a revolving credit agreement, you
have the option each month of repaying in full or paying
payments at least as high as the stated amount. The minimum
payment is based on the amount of balance that is due. Most
credit cards such as Visa, MasterCard and Discover are revolving
credit agreements. Retail store cards and gas credit cards may
also have revolving agreements.
Choosing a Credit Card
Most credit card issuers have online applications, but first, you should go to a credit card comparison website so you can gauge what type of card would be the best for your lifestyle. Shop around and compare options to get the best deal.
Take a look at Cash Courses Understanding Credit Versus Debit Cards
Here are some website we recommend for comparing credit options:
Fees and Interest
Annual Percentage Rate
An annual percentage rate (APR) is the
cost of your credit stated as a yearly percentage rate. The APR
is noted on your bill every month and is either fixed or
variable. A fixed percentage rate, despite the
name, may be subject to change without notice and could be
lowered or raised.
Grace periods allow you to avoid
interest charges by paying your current balance in full before
the due date. Make sure the credit card you choose allows a
Annual fees can range from $15 to $25
(sometimes much more) and you must pay whether or not you use
the card so shop around to find cards without these fees.
Most credit card issuers impose late
fees when you make your monthly payment late. These late fees
are bad enough, but the fine print may say that since you’ve
been late, the issuer can raise your interest rate and revoke
any special rates you have in effect, such as balance-transfer
rates. Read the card agreement to learn how these fees will
affect your interest rate.
This fee is added to your balance and
it will take even longer to pay off your balance.
Most credit card companies offer you
the option of a cash advance — using your credit card to
withdraw cash from an ATM. In general, you never want to take
out a cash advance. Cash advances incur fees, and typically
interest charges, starting immediately at the time of the
withdrawal. This can cost you high interest rates and easily can
make your credit balance unmanageable.
A credit agreement includes all the terms, conditions and finance charges
associated with your credit card. Card issuers update these
agreements frequently, and you can either accept the new terms or cancel the card. To avoid being taken
advantage of, read credit agreements carefully
and compare them to offers by known lenders, such as your bank
or credit union.
A Few Other Handy Tips
Only Accept the Credit You
Although having credit available when
you need it may seem comforting; unused credit can count against
Make Payments on Time
On your due date, you have until 5 p.m. to make your payment. If your due date is over a holiday or on a weekend, you usually have until the following business day to make your payment. If you are late, finance charges such as late fees and higher interest rates are likely.
More Than the Minimum payment Each Month
Minimum payments result in maximum costs. They also mean remaining in debt for a long time. Pay as close to the full balance as you can, and stop using a card the minute you can’t pay the balance off in full. (And if at all possible stop using it before then).
Don’t Increase Credit Spending when Your
Instead of spending your new extra income, save for your emergency fund or invest it. Avoid the trap of increasing your spending when you increase you income. It’s wiser to reduce your debt.
Keep the Number of Credit Cards You Own to a
Most credit counselors recommend carrying no more than one or two credit cards.
Understand the Cost of Credit
Think about how the charges, monthly payment and length of time you will have to make payments will affect your lifestyle. You should also consider how this commitment of future income to paying off debt might affect your budget.
Compare the Costs
Take Advantage of Rebates
Get Reimbursed for Work Expenses
If you use a credit card for work for travel and food expenses, make sure you submit your expense report immediately and pay off your balance. You don’t want to pay interest on work expenses.
Pay your credit cards off in full each month.
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