COPYRIGHTED MATERIAL
Make a Plan. Despite their dangers, credit cards can be used safely and responsibly. Let’s discuss a few key things you can do to keep the credit card beast on the leash and avoid becoming a victim of high interest rates, overspending, delinquencies and bad credit scores. If your personal credit card plan follows these rules, your credit card will work for you, not the other way around. Set Alerts. Recall that in Chapter 2, The Battle of the Banks , you learned that checking accounts come with management tools such as low and minimum balance alerts that warn you whenever you are in danger of incurring a fee or penalty. Many credit cards also come with the ability to create balance alerts, payment due notices, over-the-limit, and other warnings . Use all available account features to your advantage. Download the mobile app, if the card comes with one, so account information is always at your fingertips. Pay It Off Every Month. Remember, except for cash advances, you don’t have to pay any interest on credit card purchases if you pay the balance, in full, during the grace period each month. This is the best way to keep the credit card beast on the leash. By paying the full balance off on time each month, you save yourself money by avoiding interest charges. According to surveys, a majority of credit card users (54%) believe that carrying a monthly debt burden improves their credit score. This is just plain wrong. Carrying a balance will simply cost you money and damage your credit score. Pay it off. Never Pay Less than the Minimum. Even when funds are tight, never pay less than the minimum payment . Paying less than the minimum is like paying nothing at all. It may trigger the penalty rate and cause damage to your credit score. In a financial pinch, make timely minimum payments and stop charging on the card until your finances improve. Pay on Time. If you don’t pay at least the minimum payment or if your payment is late, meaning it’s received after the payment due date, you will be charged a late fee. Don’t get into a pattern of making late payments, because it results in interest accrual and wasteful charges. Calendar your credit card payment due date and be sure to send the payment several days prior . Pay Highest Rates First. Most Americans who use credit cards have more than one. In fact, in 2015 the average number of credit cards per user was 3.7. If you have multiple credit cards, you may face a choice: which credit card bill should be paid first? Always pay the credit card bill with the highest APRs first. This allows you to save the maximum amount of money. Credit cards should be paid in order of their APRs, highest to lowest. Set Up Automated Payments. Most major credit card companies offer cardholders the option of setting up automated payments. This authorizes the credit card company to automatically debit the cardholder’s bank account every month when their payment is due. Payment options include: a debit in the amount of the minimum payment , a full balance payment , or a fixed payment amount . Automated payments prevent late payment fees and avoids the risk of triggering the default rate. Supplement automated minimum payments with additional amounts to avoid the balance growing out of control. Limit Your Debt. Every credit card has a maximum credit limit. To use a credit card responsibly, it is vital to stay well below that limit. Experts advise following the 30% Rule : Do not exceed more than 30% of the credit limit. If your credit limit is $1500, keep the card balance below $500. This is called the credit PRODUCT PREVIEW
Chapter 13 | Credit Card Craze 250
Made with FlippingBook - Online catalogs