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Credit Cards

Why should I get a credit card?

When you use credit cards correctly, you can:

  • Raise your credit score, which will help you qualify for things like home and car loans.
  • Earn benefits like rewards points and cash back on purchases.
  • Get theft protection and extended warranties on purchases.
  • Dispute charges when you’re not satisfied with a purchase or you were mischarged.

For more information on Credit Cards visit Cash Course's article Tips for Managing Credit Cards

Terms to Know

Interest Rate
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.
Credit Limit or Line of Credit
Your credit limit is the maximum amount of money that the credit card company will let you borrow.
Finance Charge
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.

Credit Agreements

There are two primary types of credit agreements — 30 day agreements and revolving credit agreements.

Thirty-day agreement
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:

 www.consumerreports.org

 www.bankrate.com

 www.creditcards.org

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
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 grace period.
Annual Fees
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.
Late 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.
Over-the-Limit Fees
This fee is added to your balance and it will take even longer to pay off your balance.
Cash Advance
 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.
Credit Agreement
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 Need
Although having credit available when you need it may seem comforting; unused credit can count against you.

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.

Pay 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 Income Increases
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 Minimum
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
Compare the cost of credit from three different sources so you can plan your big purchases carefully. It’s not a good idea to make these types of decisions on the spur of the moment.

Take Advantage of Rebates
A rebate is a partial refund of an amount spent. Some credit cards allow you to accumulate points that can be used for free airline tickets, hotel rooms and more. Just be careful to not end up paying finance charges or accumulating debt that you are unable to repay. The value of points or rebates is always much less than the interest you’ll pay on your unpaid balances.

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.

Don’t Let Your Balance Build
Pay your credit cards off in full each month.

For more help visit:

LifeTuner: http://lifetuner.org/credit-card-debt/