How to Stay Out of Credit Card Trouble

Having a credit card can be a positive experience as long as you understand the privilege and the responsibility that goes along with it. Responsible use of a credit card can boost your credit rating--misuse of a credit card damages your credit rating for years. By adhering to some specific guidelines, you can make sure that having a credit card always works in your financial favor.

Difficulty: Moderate

Instructions

1. Read all of the documentation that comes with your new card before you activate it. As tedious as this can be, the documentation contains important things about your card that you need to know.

2. Decide whether or not you really want the card. If you decide you don't actually want it, call the credit card company and cancel it, then cut it in pieces and throw it out. If you keep it, activate according to the directions given by the issuer.

3. 
    

   Sign your credit card on the back by writing "Check I.D." instead of your name. Doing this one small thing can help stop someone from being able to use your credit card if it is stolen.

4. Calculate what 75 percent of your credit limit is. Write this down and memorize it, and make this your actual limit. Not only will you avoid going over your limit this way, but potential creditors also look favorably on this type of credit card spending behavior.

5. Buy a small organizer for recording dates, types of transactions and current balances. Record these transactions as diligently as you record the checks you write.

6. Read your monthly itemized statement thoroughly to check that all transactions listed are legitimate. Call the credit card issuer immediately if you see any unusual activity.

7. 
    

   Pay your credit card bill on time each month, and always try to pay it in full. Paying in full every month avoids having to pay interest on your purchases, which saves you a significant amount of money each year.

Tips & Warnings

• If your credit rating is good, take your time to shop for your credit card. Choose one with a low interest rate and one that offers bonuses such as airline miles or hotel credits. Let your credit card work for you in more ways than one.
• If you are using a credit card to build or rebuild credit, you will probably pay high interest rates at first. If you go a year without making a late payment or going over the limit, call the issuing company and negotiate for lower interest rates--or shop for another card that can give those to you.
• If you don't want your credit card, don't just throw it away. Call the issuing company and cancel it, usually within 60 to 90 days. If you don't cancel it with the company, you will still be liable for the yearly fee if there is one.
• Never use your credit card for a cash advance if you can help it. There is no grace period for cash advances--you will always pay fees and interest on them, and they can be steep.

Resources

• Shop for the right credit card at CreditCards.com.
• Find consumer facts about credit cards at the FTC.