avoiding credit card woes
Posted : July 2, 2005
Last Updated : May 14, 2014
If you haven't already, be prepared when you turn 18 to be bombarded by credit card offers. Using credit cards responsibly can build good credit, but you can quickly become overwhelmed if you aren't careful. Keep these tips in mind to help you stay money-conscious and avoid credit card woes.
Don't fall for free gifts or promotions. Many credit card companies lure in college students by offering incentives. Under the CARD act of 2009, credit card companies can no longer offer "any tangible item as a gift" on campus or within 1000 feet of campus. However, companies can still offer incentives at locations away from campus. Gift cards, t-shirts, backpacks, coolers, airline miles - are they really worth damaging your personal credit? Your credit score decreases each time a new inquiry is run in your name, so choose one or two cards and stick with them for the long run.
Shop around for a card. Before you sign up for a credit card, be sure to read the fine print. Try to find a card that offers no annual fee and a low finance charge.
Open an account with a low credit limit. A low credit limit makes you less likely to accrue a lot of debt. Even if you're approved for more, ask for a limit of under $1,000 and plan to charge much less.
Pay full amount each month. If you always pay the total balance, then you will build a good credit rating and avoid credit card trouble and big finance charges. With a finance charge of 18% on a $1,000 balance, making minimum payments could take 12 years to pay off and cost an additional $1,115 in interest. If you cannot pay your balance off in full each month, adding even $25-$50 above the minimum payment helps.
Pay bill on time every month. If you send in late payments, not only will it hurt your credit score, but you will also be charged late fees. Make sure you know when your payment is due each month, so you can avoid those extra charges.
Avoid cash advances. Most fees for cash advances are steep and interest rates are often higher. If you need cash, use a debit card.
Avoid impulse shopping. Charging an occasional slice of pizza and a soda is fine, but purchases like that add up quickly. Treat your credit card like a checking account. Use it only for emergencies or when you know you can pay off the balance in full when your bill arrives.
Monitor your credit report. Review your report annually and question any discrepancies. Credit agencies can make mistakes.
Having a credit card can be beneficial if you use it in a responsible manner. If you get the best deal when you sign up for a card and pay off your balance each month by the due date, then you should have no problems avoiding credit card woes.