Credit Card Facts: Top 10 things you need to know
Credit cards can be your best friend or worst enemy. This small piece of plastic is one of your life’s major financial assets and you need to know how to make it work for you, not against you. While many major credit cards have the same features, there are also differences and it is highly important for you to read the fine print located at the back of your billing statement and yearly disclosure statement. You will need to consider the fees, transaction charges, annual percentage rates or APR, benefits, grace or free period, calculation of finance charges, and their terms on balance transfers.
Know that credit cards are representation of real cash, which you spend now and pay later. Before you even make that first swipe on your purchases, you must know these credit card facts which can help you maximize the benefits of having your own credit card:
Credit Card Fact #1 When you open a new credit card account, you are making an impact on your credit score, reducing 5 points from it with each new card. Even if you won’t have it activated, each time you receive a new card in the mail, it will reflect on your credit score.
Credit Card Fact #2 Don’t be fooled into believing that paying off your balance each month will not hurt your credit score. If you use your credit limit too much, you hurt credit score as well.
Credit Card Fact #3 You need to bring your ID with you when you make a purchase since the merchant’s clerk may compare the signatures on both cards, which will act as a safety precaution against identity theft.
Credit Card Fact #4 Opt out from the mailing list in your local credit bureau so your name will not be sold to credit card issuers. You can do this by calling 1-888-5-Opt-Out.
Credit Card Fact #5 Reward cards are not free and only a few credit card companies issue it to their clients at zero cost.
Credit Card Fact #6 Paying your bills on time will increase your credit score and makes you avoid large credit card outstanding balances which is bigger than 25% of your maximum credit limit ( considered as red flag by banks or lenders ).
Credit Card Fact #7 Don’t fall into the minimum payment trap and dig yourself out before it’s too late. Paying your balance in full allows you an interest-free loan each month.
Credit Card Fact #8 Forget about consolidating your credit card debts into one loan. There’s just no thing such as an easy way out when it comes to bad debts.
Credit Card Fact #9 Although debit cards can also be used for your purchases, know that they don’t offer the same type of protection that credit card gives in cases of product defects and returns.
Credit Card Fact #10 Beware of credit card skip-a-payment plans and universal default. Nonpayment won’t be reported to credit bureaus, but your outstanding balance will still continue accruing finance charges. If your credit card company has a universal default feature, it shall allow your lender to increase APRs or interest rates if you have late payment history with another lender.
When Credit Cards are Used Correctly
Overall, when credit cards are used correctly, they can be a great tool to finance your financial and business needs. Terms may vary, but the principle is still the same when it comes to credit cards: you need to plan your finances carefully to avoid payment penalties due to delinquencies. The Federal Trade Commission or FTC helps consumers avoid credit card frauds and unfair business practices. To file your complaint, you may visit FTC online ( www.ftc.gov ) or dial their toll-free number 1-877-FTC-HELP, or reach them at their TTY Hotline 1-866-653-4261.
RESOURCES:
Federal Trade Commission. “ Choosing a Credit Card: The Deal is in the Disclosures. “ June 2008.
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre05.shtm
Dickinson State University. “ 10 Tips for Managing Credit Cards. “
http://www.dickinsonstate.edu/pdf/finaid/CreditCardBrochure.pdf
Lynott, William. “ 9 Facts You Need to Know About Credit. “ 2009. ChiroEco.com.
http://www.chiroeco.com/news/chiropractic-news.php?id=2010
Credit Card Finder. “ 4 Sneaky Credit Card Facts You Weren’t Aware Of. “ July 2009.
http://www.creditcardfinder.com.au/5-credit-card-tricks-financial-lenders-sneak-into-fine-print.html
Credit Loan, LLC. “ Five Credit Card Facts You Should Know. “ September 2009.
http://www.creditloan.com/blog/five-credit-card-facts-you-should-know/
