Credit cards have become a necessity in today’s technology-driven economy.  A credit card is a convenient payment method accepted almost everywhere.  It allows you to receive valuable rebates, earn free merchandise and services, and take advantage of mail order and Internet discounts.  However, not all credit cards are created equal and accepting an offer is a major decision that requires some homework.

So, whether you have never owned a credit card, or are a seasoned “revolver” (carrying a balance month to month rather than paying the full balance each month) here is some basic information to help you become an informed and responsible credit card consumer:

Find out your credit score and review your existing credit.  This information will give you a good idea of what interest rate to expect.  In general, the higher your credit score, the lower your interest rate.  You may also be able to avoid annual membership fees and monthly participation fees with a high credit score and a good credit history.

Do not apply for every credit card offered to you.  When you apply for a credit card you allow creditors to review your credit report and credit score, and too many inquiries can lower your credit score.  So, the next time you are offered an incentive or discount as a reward for applying for a credit card, consider the possible consequences.

Pay close attention to the terms of the credit card.  The annual percentage rate (APR or interest rate), late fees, over-limit fees, balance transfer fees, cash advance fees, membership fees, and participation fees can all add up – you may end up paying more than you ever anticipated.  Make sure the interest rate is a fixed-rate percentage and can only be changed with 15 days written notice. Avoid variable interest rates – managing payments can be difficult with a fluctuating and unpredictable interest rate.

Know the grace period of the credit card.  The grace period is the period of time you have to pay the credit card balance in full each month without incurring interest charges.  The grace period should be 25 days or longer, and by law, must be prominently displayed on the credit card application.

Be aware of credit card company practices.  Remember, credit card companies are in the business of making money, and they currently enjoy tremendous freedom in their business practices.  For instance, they are able to monitor all of your credit accounts and can use this information to track your credit history.  You may find your interest rate raised on one credit card because you made a late payment on another account.

When used properly, a credit card can be a valuable and convenient financial tool, but you must choose wisely.  Before accepting an offer, you need to understand the many (and sometimes confusing) terms and obligations of the credit card agreement.  By making an informed decision, you will be able to confidently enjoy the many benefits of owning a credit card.

Learn More!
Consumer Action 
www.consumeraction.org
This informative site features credit card surveys with interest rates, fees and other terms for dozens of credit cards, as well as free brochures and guides on choosing and using credit cards.

For more information, please contact Andrea Hardy at the CRT H.O.M.E. (Home Ownership Made Easy) Center.  She can be reached at 860-560-4210 orhardya@crtct.org