Guidelines for Credit Card Use
Credit cards offer one of the most convenient and safe ways to make purchases. If you pay using credit there's no need to carry cash, and if your card is lost or stolen the credit card company will not hold you responsible for purchases someone else made with your card. But credit cards carry other risks that make it important to use them responsibly.
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Selecting a Card
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There are many different credit cards from which to choose, and while they all function in the same basic way, picking the wrong card can pose issues for the user. Some cards offer higher credit limits and flexible spending options but also carry an annual fee, which you'll pay whether or not you ever even use the card. Others offer perks such as cash back, airline miles or points for shopping discounts. It's also important to compare interest rates. Lower interest rates mean you'll pay less in interest each time you carry a balance. However, some cards have low introductory interest rates that rise after a few months. Devote some time to reading the fine print and making sure that you only apply for a card that fits your needs and budget.
Activation and Use
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When your new card arrives you'll need to activate it. This typically involves calling a toll-free number from your home phone and entering personal data to verify you are the card's owner. Credit card activation helps prevent fraud, but it also means your card may not work unless you follow the activation steps on the welcome notice that comes with the new card in the mail. When you make purchases with your credit card, merchants use the card issuer's network to request the charge to your account. This may take several days to actually post to your account and show up in your balance. This means it's possible to exceed your credit limit, which may lead to a fine. In other cases, merchants will reject your card when you attempt to exceed your credit limit.
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Making Payments
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Each month, you'll receive an email or paper statement in the mail. Credit card statements list your current account balance, as well as the payment due date and the minimum payment, which is usually a percentage of your balance. While making the minimum payment will keep your account in compliance, you'll also be incurring the maximum interest charge for the remaining balance. Credit card companies must comply with federal laws that require them to note how long it will take you to pay off your balance if you make only the minimum payment. Use this information to determine how much you can afford to pay, and how long you can expect it to take to pay off your balance.
Getting Help
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Credit card debt is easy to acquire, and can be difficult to fully pay off. Even if you stop making charges, the monthly interest will add to what you owe. If you can't make your payments, contact the credit card company. They may be willing to reduce your monthly payment or offer an extended repayment schedule, rather than have you stop making payments altogether. Credit counseling agencies are another option. They are non-profit organizations that will negotiate with credit card companies on your behalf in an attempt to reduce your payments to an affordable level.
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References
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- Photo Credit credit cards image by Aleksandr Lobanov from Fotolia.com
