The key to managing credit is to not get trapped in the mindset of “I’ll buy now and pay later.” When you do borrow, you want to ask yourself how and when you’ll repay the debt – and how much it will cost you.
Tips for Smart Credit Use
- Shop around for the best credit card interest rate. Consider using one card for balances that you’ll pay in full and another card with a low interest rate for times when you need to carry a balance. A list of credit cards is available at www.cardtrak.com.
- Don’t pay interest on items you don’t really need, or for things that will be gone by the time you get your bill. Otherwise, it’s like buying that item marked up instead of marked down!
- Read your credit card agreements and the correspondence you get from issuers. There may be important information in them. For example, credit card issuers can generally change your interest rate with only fifteen (15) days written notice – even on a card with a fixed rate.
- Always mail your payments for your credit cards at least five (5) business days before the due date. Most credit card companies have steep late payment penalties. Also, your interest rate on new purchases as well as any current balance may be raised to a very high rate if you are late with your payment.
- If you pay your debts late, a late payment will likely to be reported to the major credit bureaus and will stay on your credit report for seven years. Your other credit card issuers may raise your interest rates if they see you are falling behind on other accounts.
- Call your issuers if you can’t make a monthly payment on time. Ask them about alternative payment arrangements that won’t damage your credit or raise your interest rate.
- Notify your credit card issuer thirty (30) days before you move, and don’t assume that just because you didn’t get a bill you don’t have to make your payment. If a bill doesn’t arrive, call your card issuer or lender immediately.
- Try to pay-off your total balance each month. Just paying the minimum payment amount is a common financial trap. For example, if you pay-off a $1,000 debt on a card with an 18% interest rate, it will take you more than 12 years to repay the debt.
- Aim to keep your debt payments at less than 10% of your income after taxes. If you take home $750 a month, spend no more than $75 a month on credit card payments.
Use this BankAtlantic calculator to figure out how long it will take you to pay off your credit card debt.
Credit Tips To Live By
1. Always remember that a credit limit is a loan. It’s real money that you must repay. (more…)
