Use your credit cards wisely

It’s easy to get a credit card. Managing a credit card well isn’t as easy.

  • Understand that any time you use a credit card, you are borrowing money. If you don't pay off your balance each month, interest will be added to the total amount you owe.
  • Think before getting your first credit card. Think very carefully before you decide to get your first credit card. Do you really need a credit card or would another option work just as well? Some other options to think about:
    • Getting a debit card, which is connected to your checking or savings account rather than borrowing money for each transaction.
    • Considering sharing a card with your parents and asking them to help you stay on track.
    • Waiting. Just put off the decision for six months or a year and see how well you might do without a credit card.
  • Choose wisely. When selecting a credit card, you should shop around for the best deal. Compare different cards based on your own situation. Look for the following:
    • A low annual percentage rate (APR). The lower the rate, the less interest you have to pay. Watch out for low introductory rates that are raised after a year or less.
    • The interest calculation method. This affects how much interest you pay, even when the APR is identical.
    • Low or no annual fees. If the issuer charges an annual fee, ask them to waive it.
    • All other charges (i.e., late payment fees, transaction fees, over the limit fees, etc). These can really add to the total cost of your charges.
    • A grace period. Some credit cards charge interest from the day that the charges appear on your account. Other cards offer a grace period for you to pay off your balance before interest charges begin to accrue.
    • The credit limit. Keep your credit limit low (think about $500 or less), to make sure you don’t get in over your head.
    • Wide acceptance. A major credit card is convenient, and easier to manage.
    • Services and features, such as cash rebates, frequent flyer miles, extended warrantees, etc. Think carefully about the true cost of these programs when you consider interest and other charges.
  • Limit the number of cards you get. It will be easier to keep track of your spending.
  • Think about ways you can track your spending. Waiting until your statement arrives once a month to think about your balance can get you into trouble quickly.
    • Check your account online frequently.
    • Save receipts.
    • Maintain a ledger.
  • For each of your cards, keep a record of the following in case your card is lost or stolen. Even better, keep a photo copy of the front and back of your card in a safe place at home.
    • Account number
    • Issuer’s name
    • Phone number

The bottom line: Don't spend more than you can afford to pay on a monthly basis. Wise use of your credit cards will help you establish a solid credit rating and avoid financial problems.