Using Credit Cards Wisely

Understand the terms of your credit card accounts, and be responsible with them. Plan to pay off your credit card balances in full every month. If you can't, limit your use of credit cards. Follow these rules for responsible credit card use.

  • Study the credit card agreement
    Take a look at the small print on the agreement before you open an account, or read the reverse side of your monthly statement. Learn about the grace period for payments, annual fees, cash advance fees, finance charges, and annual percentage rate (APR). This will help you manage your credit card account with the lowest cost to you. If you plan to carry a balance on your account, shop around for the lowest annual percentage rate (APR), and the best terms.
  • Use credit wisely - follow the 20/10 rule
    Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items.
  • Make your payments on time
    This is the best way to increase your credit score and avoid fees.
  • Pay off your balance monthly or pay more than the minimum payment
    You can avoid interest charges by paying off your total balance every month.  If you are unable to pay it off in one payment, try to pay it off over a few months. Lenders are less likely to increase interest rates on borrowers who pay more than the minimum.
  • Do not exceed your credit card limit
    Exceeding your credit limit is usually considered a violation of your account agreement and may result in additional fees, penalties, or the freezing or cancellation of your account.
  • Don't use cash advance checks
    Many credit card lenders will send you checks in the mail. In most cases, when you use these checks, it is considered a cash advance. This type of borrowing has a higher interest rate than credit card purchases. If you do get these checks in the mail, shred them immediately, or put them in a secure place to use only in emergencies.
  • Use only a few credit cards
    Too many credit lines can decrease your credit score because lenders will assume that you will go too deeply into debt. Limit your credit card accounts to a few that offer the lowest rates and fees.
  • Keep in touch with your lender
    Contact your lender if you cannot make a payment on time for any reason. They might be able to arrange special payment options that help you avoid credit problems. If you change your name, address, or job, notify your lending institution immediately
  • Use Balance Transfers Carefully
    If your wallet is full of plastic and your mail is full of bills, it might be time to consolidate some of your credit card debt to one lower-rate account. Consolidation can save you money over time if you switch to an account with a lower interest rate and lower fees. Make sure you read the terms and conditions carefully. 

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