What you should knowCredit_Card_iStock_000019484812Web

  • Credit card companies are very eager to get your business and will offer incentives to get you to sign up. Don't get a card just because the company is handing out free goodies.
  • Student cards often come with high interest rates since student default rates are typically higher and students haven't established extensive credit histories. Compare offers from different creditors and make sure you get the best deal available to you. 
  • Credit cards should not be thought of as an additional source of income. Use them responsibly. 
  • Cash advances have very high fees and rates. Avoid them unless absolutely necessary.

10 questions to ask prior to opening an account

  1. What is the monthly minimum payment? 
  2. When is the payment due date? 
  3. What is the annual percentage rate (APR)?
  4. What is my credit limit?
  5. Is there a grace period on item purchases?
  6. What is the penalty for missed or late payments?
  7. Is there an annual fee?
  8. Is there a fee for late payments?
  9. Are there balance transfer or transaction fees?
  10. What are the benefits or rewards?

5 questions to ask yourself before purchasing with your credit card

  1. Can I pay off the balance this month if I make this purchase? 
  2. Do I really need this item?
  3. Can I wait to have this until I save enouhg money for the purchase?
  4. Do I understand how much I will really pay for this item if I don't pay the balance immediately?
  5. Would I go to the bank and take out a loan to purchase this item?

The Cost of Purchasing on Credit

 
If you pay $30 per month
If you pay $50 per month
If you pay $100 per month
Amt of Purchases Years to repay Interest charges Total cost of purchases Years to repay Interest charges Total cost of purchases Years to repay Interest charges Total cost of purchases
$500 1.7 $91 $591 11 mo $52 $552 5.5 mo $26 $526
$1,000 4.2 $478 $1,478 2.1 $229 $1,229 11 mo $103 $1,103
$1,500 9.3 $1,801 $3,302 3.6 $604 $2,104 1.5 $242 $1,742
$2,000 Below minimum payment 5.6 $1,346 $3,346 2.1 $457 $2,457
$2,500 Below minimum payment 9.3 $3,003 $5,503 2.8 $769 $3,269

Assumptions: No annual fee for credit card; Late fees are not incurred; Interest rate: 20% compounded daily.

Keeping your credit card safe

  • DO report a lost or stolen credit card immediately
  • DO regularly check your statements
  • DON'T let anyone borrow your credit card
  • DON'T leave your credit card lying around
  • DON'T leave receipts for purchases you made with your credit card lying around

Getting out of credit card debt

If you have already found yourself in credit card debt, you may want to consider the following to get out as soon as possible. 

  • Stop making purchases on your credit card.
  • Pay more than the monthly minimum payment. Pay as much as you can afford because of high interest rates, even if it means making a few sacrifices.
  • Send in payments as early as you can. Interest accrues on a daily basis.
  • Understand how much you really owe.
  • Don’t accept offers from your creditor to skip monthly payments.
  • Refinance your debt on a card with a lower interest rate. Make sure to pay attention to balance transfer fees.

 

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