Tips for managing credit cards
The number one way to improve and keep good credit is to demonstrate
that you are a responsible individual. You will hear these words over and over
and over as you learn about financial management. Timely payment is the easiest
way to improve or to ruin your credit status.
Be aware of how your APR determines the actual cost of your purchases.
When you pay the full amount due each month, no interest charge is added to your account so your cost is the amount on the price tag. If you make the minimum payment, interest
payments will be added to your unpaid balance. Over time, your unpaid
balance will grow as interest charges are added on top of the original amount
you charged. You will pay interest on your interest charges. The actual cost
of your purchases may then balloon far beyond their true value.
Your credit card company will send notices to you by the mail
when changes are made to your current contract. Review inserts carefully for
important information regarding your account that may be hidden in what looks
like an advertisement. On the other hand, convenience checks or a solicitation
for more business should always be shredded.
Be honest with yourself if you make this choice in selecting a credit card company. Will you
carry a balance or pay your bill in full each month? Grace periods are only
helpful if you pay in full every month. Otherwise, a low interest rate is the
way to go.
These marketing devices may seem very attractive in a money
crunch, but the interest rates are so high that you could end up in more financial
trouble.
Credit cards are best for travel or that night you walk out
of class and the car won't start. Most students don't have an extra $500
for major repairs or problems. Travel with cards offers protection against theft
and and can be much safer than carrying cash or traveler's checks.
Freeze your credit card in a bowl of water if you are weak
and likely to overspend impulsively. Then, when you find something you'd like
to purchase, go home and thaw the frozen card in the refrigerator. Thawing should
take a few days, plenty of time for you to decide whether you really want to
make the purchase now, buy later, or save your time and money for another day.
Did you know ... ?
- Some credit card companies charge a transaction fee to convert your cash
to a foreign currency.
- If you are a long-time credit card holder with a high interest rate, request
that the company give you a lower interest rate or ask them to drop the annual
fee. Credit card companies want your business and will often do what they
can to keep you. The worst they can say is, 'no.'
- You can deny a raise to your credit limit. If you get a letter that congratulates
you on a new increased credit limit for being such a good customer, call the company
and say, 'No thanks.' A higher credit limit is an invitation to spending
beyond your means. While a company will set the initial credit limit on your
card, you can deny increases.
Why would you want to deny an increase? Having too much credit available
can negatively affect your credit rating. If your debt-to-income ratio is more
than 15 percent, you could be denied future credit.
- Your credit card issuer can close your account anytime, for any reason,
even if your account is in good standing. It has been known to happen to customers who incur no fees and
pay their balance every month, simply because their account may not generate enough profit
for the card company.
