Staying away from fees Another way to manage your credit cards wisely is to avoid fees. Some fees are harder to avoid than others, but you should always try to keep those costs under control. For example, many cards have an annual fee. The cards that have an annual fee are usually ones for those with damaged credit, or conversely they may be for those who want to earn rewards and who have excellent credit.
Other fees are assessed for performing a particular type of transaction. For example, a balance transfer fee is often added as a percentage of the amount transferred. Cash advance fees are imposed when you use your credit card at an ATM. Also, many credit cards still impose a foreign transaction fee on all charges processed outside of the United States. Thankfully, there are many credit cards that no longer add this unnecessary fee though. Finally, late fees and return check fees fall into the category of penalties, and they are to be avoided whenever possible.
Building credit Another important function of your credit card is to help you build credit. Conversely, missing payments and accumulating debt will result in negative information on your credit report and a lower credit score. But the good news is, your score will rise quickly when you pay off existing balances. You also want to avoid applying for numerous credit cards in a short period of time, or constantly opening and closing accounts.
A responsible credit card user could have two to four cards, so long as he or she avoids interest charges and unnecessary fees. While having multiple credit cards will add to your credit history and improve your credit score, you should never have more than you can responsibly manage. In fact, just having an account open and in good standing adds to your credit history.
Using a secured credit card When you have bad credit, it can be difficult to open a new account and rebuild your credit. But Secured credit cards are offered to applicants with nearly any credit profile. Secured credit cards work much like standard, unsecured cards, except they require you to pay a refundable security deposit before opening your account.
And with most cards, the amount of your deposit becomes your available credit. After opening your account, you can use your secured card just like any other credit card. After several months of responsible use, you should start to see your credit score improve. And after a year of on-time payments, many secured card users are able to qualify for a standard, unsecured card.
They can then close their secured account and receive a refund of their deposit. Here are just a few ways to protect your card: Keep it in a secure place. Avoid leaving your card in your car or in an unsecured location where you work. And never loan your card to a friend. There are many places where you can shop — online, for instance — where, if someone has your card number, they could type it in and easily make purchases.
Skimmers are counterfeit devices added to machines. Know your rights. But for this law to work, you have to report any unauthorized transactions. Utilizing cardholder benefits Beyond merely using your credit cards responsibly, using them wisely includes taking advantage of cardholder benefits that come with your card. For example, most credit cards come with rental car insurance, allowing you to decline the costly optional policies offered by rental car companies.
Earning rewards Many credit cards offer rewards in the form of points, miles or cash back. So unless you always avoid interest charges by paying your balance in full, you should go with a non-rewards card to minimize interest charges. If you avoid interest charges though, there are few reasons not to earn rewards.
From turning down credit card offers to developing good bill-paying habits, learning how to manage credit now can help them manage debt throughout their life. Here is some good advice to pass on:. Anyone under 21 needs an adult co-signer to open a credit card account or must show proof that they can repay the debt themselves. They must also get permission from a parent or guardian to increase the credit limit on a joint account held with that adult.
Want more ideas? Read Ask Carrie for more advice on kids and teens , or see banking, credit and debt. Each application triggers a credit report inquiry, which gets logged on your report—and a lot of inquiries can have a lasting negative effect on your score. Also, stay away from cards that offer incentives like airline miles. Skip to content. Our two cents. Ready for plastic? Here are some steps to help ensure that your son or daughter is well prepared for their first credit card: Make sure your teen has a checking account before they get their first credit card.
It's important to learn how to track spending before using a credit card and to understand the importance of having funds available to make payments. Give your teen a credit card linked to your own credit card.
This lets you monitor their card activity and help them learn to use credit responsibly—before they do it on their own. Limit how much your kids can charge. Whether they're authorized users on your card or have their own, start with a low limit. Help them understand the details. Insurance companies may charge higher premiums to people with lower credit scores.
Even for services that cannot be denied based on credit like water or electricity , providers may require large security payments before starting your services if you have a low credit score. Points are awarded or deducted based on factors such as how long you have had credit cards, whether you make your payments on time, and if your credit balances are near maximum.
Some of the things that affect your credit score are:. For a higher credit score:. Another way to help improve your credit score is to have a mix of revolving credit for example, credit cards and installment credit for example, a car loan.
Your credit score is important. Good credit may make it easier to borrow money, may lower interest rates on loans or credit cards, may reduce insurance premiums, and may make it easier to rent an apartment and buy a home. Lenders will likely look at a credit score as an indication of how reliable you are in paying your debts.
Occasionally you will see industry-specific credit scores which can range from Generally the higher the score, the lower the risk for the lender, which may result in lower interest rates for you. There are five factors that determine your score:. Improving your credit score can take time. It may make borrowing money cheaper, and can even impact your ability to get a place to live. The best way to improve credit is to manage it responsibly over time, paying your bills on time and only applying for credit when you need it.
You can start today by forming good habits and building a consistent credit history. The higher your scores, the more likely you are to qualify for the most favorable terms, which will save you money. Improving your credit scores takes time, but the sooner you address the issues that might be dragging them down, the faster your credit scores will go up. You can increase your scores by taking the following steps.
Pay Your Bills on Time. Your credit score shows how well you pay your bills. Payment history has the biggest impact on your credit score. The amount you owe related to your available credit limit helps lenders know how well you can manage credit. Being overextended is a warning sign for lenders.
Having unnecessary credit can harm your credit score and might tempt you to overspend.
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