Shop around for the best card. Don’t pick a credit card just on a whim. Take the time to check out what is being offered and pick the one that best suits you. Some factors to keep in mind include:
- The annual percentage rate (APR).
- The annual fee.
- Length of the grace period. (The grace period is the time during which you can pay your bill without having to pay interest. The 2009 CARD Act requires that if issuers have a grace period that it be at least 21 days.)
- The dollar amount of penalty fees.
- The balance calculation method.
Set up and live within your budget. Be sure you know how much money you have in the bank, and how much you will need to pay in full when your credit card bill arrives. For more information on how to set up a budget, click here.
Use prepaid or debit cards. This will ensure that you are not spending money you don’t have. However, be sure to record all of your charges to avoid any overdraft fees.
If you can eat it or drink it, or if it costs less than $20, use cash. Using credit cards for small purchases can be misleading and unwise. Paying with a card doesn’t seem real – after all it’s not money you are taking out of your purse or wallet. But those small purchases can add up very quickly, and you can soon find yourself owing more than you can pay.
Establish and maintain good credit. How you handle credit today will have a significant impact on the future. Banks, potential employers, utility companies, and property management companies all run credit reports when you apply for a loan, a credit card, a job, or sign up for utilities. You can even find yourself being denied a student loan because of a bad credit report.
Know what’s on your credit report. You can get a free copy of your credit report from each of the three credit bureaus every 12 months. The report can be ordered online at www.annualcreditreport.com or by calling 1-877-322-8228.