Winning the Credit Card Game

Winning the

Credit Card Game

One of the most critical pieces of advice is this:

Pay your balance off monthly.

by Doris Settles, Staff Writer

Games come with rules and well-thoughtout strategies that put you in the winner’s circle. Using credit cards wisely and safely is like playing a game that some win and others lose. Here are some strategies that, if followed carefully, can help you be a winner.

Snazzy advertising, amazing promises and glitzy card designs lure us into signing on the dotted line. But before you do that, read the fine print … ALL the fine print. These are just a few of the fines that may be hiding in “fine print”:

• On some cards, one late payment can raise an introductory rate of 1.9 percent to a 35-percent default rate. • A hefty fee normally awaits those who go over their contracted limit. • Spending over your limit can also cause your interest rate to skyrocket. • Late fees have increased in recent years from $5 to $10 to an average of $30.81. • You may be charged a fee for making a payment over the telephone. • Some companies insist that it takes 48 hours or more to process your payment, which (even if it arrives on the due date) can earn them additional interest and possible late-payment fees.

One of the most critical pieces of advice is this: Pay your balance off monthly. A $2,000 Visa balance with an interest rate of 18 percent would take nearly 30 years to pay off when making a 2-percent minimum monthly payment. The interest accrual would be $5,000. Even if you up that to a 4-percent minimum payment, you wouldn’t be paid in full for 10 years with an interest accrual of $1,100. It’s costly to make minimum payments.

If you charge everyday items without thinking about it or charge items you really cannot afford, it’s easy to see your balance quickly go beyond your ability to pay it off each month. If you can’t keep the balance within reach of paying it off each month, use cash or debit cards for most purposes. Use credit cards sparingly as a credit-score builder.

Know how obtaining a new credit card or cancelling a card will impact your credit score. Don’t cancel a long-standing card in favor of a new one if you only have one card; your score may tank. You might keep the card open but switch to using the new one. A good rule of thumb for building long-term credit is to keep your spending within 30 percent of your credit limit; your score is calculated on your debt-to-credit ratio so keeping it low builds your score.

If your purchasing decisions go awry – if you bought items you badly wanted, rather than really needed – and you have a balance you cannot pay off, there are several strategies to keep your credit strong and save money. New purchases added to an existing balance accrue more interest. So charge new things on a “clean” card – one without a balance – and keep it paid off. Pay as much as you can until the card with a balance is paid off. Meanwhile, renegotiate your interest rate, especially if you are receiving offers lower than you currently pay.

The information listed on your credit report doesn’t just affect the number of credit cards you can carry. It can also play a part in where you live, who will hire you and what you’re required to pay in order to receive household services such as telephone, gas and electricity. Be aware that the information in your credit file can sometimes be misleading or incorrect. It can sometimes even belong to someone else.

According to the Fair Trade Commission, people generally do not become aware of identity theft until about 14 months after the crime has occurred. Meanwhile, debts are accruing in your name and damaging your credit history. Fortunately, a number of new laws protect your rights as a credit consumer. By becoming familiar with these rights and using them, you can take control of your own financial future.

Here are seven ways to manage your personal information wisely and minimize the risks of identity theft: 1 Before you reveal any personal information such as your Social

Security number or PIN, find out whether it will be shared with other institutions or organizations. 2 Pay attention to billing cycles; contact the creditor if a bill is late. 3 Guard your mail by depositing outgoing mail in a post office collection box or at your local post office. Do not leave mail in your mailbox overnight. 4 Look for Internet security emblems such as VeriSign© before giving out information online. 5 Protect personal information in your home. Shred charge receipts, credit offers, insurance forms, discarded checks and financial statements. 6 Guard your Social Security Number, and leave the card in a safe place at home. 7 Order your credit report from the three bureaus every year and scrutinize it.

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