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Debt Management Tips - Credit Cards

Credit cards can make life simple. Sometimes it is so easy, you don't realize how much you have spent until you receive your monthly bill. By that time it is too late. Many credit card companies set up a table at college campuses to draw students in with free tee shirts and other freebies in exchange for completing a credit card application. Do not just sign up for a credit card without thinking the process through.

Before deciding to apply for a credit card, ask yourself a few questions. When making your decision about a credit card, ask yourself the following:

  • Do I need a credit card?
  • Can I afford a credit card?
  • Will I be able to pay off my balance each month?

If you decide to apply for a credit card, be a smart consumer and shop around. Look for a company that offers the following:

  • Low interest rates or finance charges (combined, they are called APR)
  • Low or no annual fees
  • A grace period (time during which no payments are due) before finance charges are posted
  • Other benefits including purchase warranties, free gas, airline miles, etc.

There are advantages to applying for a credit card. Some of the advantages include:

  • Using the card only in case of emergencies
  • Not needing to carry cash or checks
  • Creating a good credit rating for future purchases
  • Enhancing personal responsibility and independence

There are also disadvantages to credit cards. These include:

  • buying items that you do not need
  • not paying bills on time and paying late charges and interest
  • creating a bad credit rate, which will affect future purchases such as homes and cars

Helpful Hints on Using Credit Cards

Listed below are some tips to assist you when using your credit card:

  • Try to pay off your credit card debt as soon as possible before you have to pay fees. Fees can be a concern to you regarding credit cards, as stated below:
    • Try not to carry balances forward, as some cards charge 20% or more in interest. (Interest is usually called "Finance Charges" on your statements.)
    • Check your statement carefully and call the company right away if you have any questions
    • Be careful of the large finance charges for cash advances. Interest begins accruing as soon as you take the money out, not after the next statement closing
    • Be aware of annual fees. Many times you are charged $50 or more just to have the card
    • Look at those introductory offers carefully. A low rate may expire in six months, and then increase dramatically after the "introductory offer"
    • Make sure you think about the purchases you make. If you are not able to afford the purchase now, chances are you won't be able to afford it in a month when the credit card bill comes in.
    • Use the credit card for emergencies only.
    • Don't use a new card to pay off existing debt.
    • Try to pay the balance at the end of each month.

If you do get behind in your payments, there are several ways you may relieve the situation:

  • Cut costs as stated under Strategies on Stretching Your Dollars
  • Call the credit card company and ask if they will work out a repayment schedule
  • Stick to your monthly budget. Remember to buy what you need, not what you want
  • Stop using the credit card. Only buy what you can pay for in cash!
  • Look for credit counseling services. Some offer educational programs or individual counseling sessions to help keep you on track.
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