Responsible use of credit cards

Listen to this valuable advice. Then review the list of tips — and use them!

MichaelIn general, people spend more when they use credit cards instead of cash. It can be easy to get in over your head with credit card debt before you know it — and we don’t want that to happen to you. So as a general guideline, keep your credit card debt low enough so that your required payments are no more than 10% of your monthly income.

LuisGreat advice! And to keep your credit card spending under control, try this strategy: use cash or your debit card for everyday purchases and save your credit card for buying larger, more lasting items.

MichaelThat is a good strategy to consider. Remember, when you use your debit card, the money is deducted directly from your checking account. But with a credit card, you’re borrowing the money. So before you charge, you need to think through not only what you’re going to buy, but how you’re going to repay.

LuisWhen you’re starting out with credit cards, consider having just one card with a low spending limit. That will help you start to get comfortable using credit and paying it back, and it will stop you from getting into big trouble with debt.

MichaelAnother good guideline is to keep your credit card balance below 70% of your limit at all times. This will help you build credit by showing lenders that you can control how much credit you use. And it leaves enough credit available in case of an emergency.

Using credit cards wisely

Look for low-fee, low-interest
Get a credit card with a low annual fee and low interest rate. Be sure to read your cardholder agreement. It spells out all the fees and finance charges. Call your card company’s customer service number if you have questions.

Pay off as much as you can
Always make at least the minimum payment each month, but pay as much as you can each month. Pay off the entire balance whenever you can. This will reduce the finance charges you pay.

Be sure you can afford it
Don’t use your credit cards to buy things you really can’t afford. Follow your budget.

Keep within your limit
If you go over your limit, you’ll likely be charged an overlimit fee in an amount specified in your cardmember agreement. You could also damage your credit rating. Track your credit card charges throughout the month and stay within your credit limit. To build credit and still be prepared for emergencies, try to keep your balance below 70% of your limit at all times.

Pay on time
Pay your credit card bills on time. This is one of the best ways to build good credit because it shows lenders that you’re reliable. It also helps you avoid late fees.

Avoid cash advances
Some credit card companies may offer you a cash advance. Avoid this option except in emergencies. You’ll be charged a fee and the interest rate is usually much higher!

Get debt help early
If you’re getting into trouble with debt, get help early. Consider talking with a credit counselor, an experienced professional, who can help you get out of debt.

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