Mastering the credit cards used to be difficult for many people. Unless financially savvy, most did not have a clue until it was too late. Now there is so much information out there and so many financial consultants willing to help, that young or old, someone is willing to help the consumer understand.
Mastering the Choice of a Credit Card
You need to know how to choose the right credit card that is going to work for you. Here are just a few cards:
- Standard Card – revolving balance, no rewards
- Balance Transfer Credit Cards – low introductory rate
- Reward Credit Cards – cash back, points, and travel.
- Student Credit Card – for college students and new to credit
- Charge Cards – preset spending limit
- Secured Credit Cards – credit is equal to secured amount
- Subprime Credit Cards – high-interest card for poor credit
- Prepaid Cards – does nothing for credit history
- Limited Purpose Cards – used like credit cards with a minimum payment and finance charge
- Business Credit Cards – standard business credit and charge cards
Mastering the Research of a Credit Card
Now here is where you are going to put your research skills to the test.
1. Reading the Agreement
- Understanding Different Interest Rates
- Annual Percentage Rate (APR)
- Finance Charge
- Prime Rate
- Penalty APR
- Periodic Interest Rate
- Daily Rate
2. Know and understand your fees
- Application fee – the fee for the application
- Annual fees – fee charged for the convenience of having the credit card
- Balance transfer fees – the fee to transfer the balance
- Cash advance fee – the fee for the cash advance service
- Finance Charge – the monthly charge for carrying a balance past the grace period
- Late fee – making a payment after the due date or less than a payment by the due date
- Over-the-limit fee – balance beyond your limit
- Return check fee – insufficient funds in checking account
- Foreign transaction fee – for currency made in a foreign transaction
Get to know your credit Card Statement
One of best ways to master your credit cards is to get to know just how to read your credit card statement. You can either have them sent through the mail or get them electronically, once you set up an account online.
A great example I found that explains a credit card statement is “How to Understand Your Credit Card Billing Statement, “at credit.about.com. The article shows what the summary area should look like. It also shows what a payment information area should look like. The monthly interest calculations are pictured so it can be found more easily on the statement. Each section is pictured and explained so that it is easy to become familiarized with the credit card statement.
One of the biggest hurdles to overcome is the ability to master your credit cards instead of allowing them to master you by becoming dependent on them. Try not to carry them unless there is a specific purchase you intend to make. Avoid using the convenience checks or taking out cash advances, as well. They are the most expensive transactions a credit card company offers their customers.
Another way that you can master your credit cards is to keep up with the payment schedule, paying the balance in full, or at least paying the minimum due before the due date. It is best if you keep the purchases you make on your credit card within your budget.
If you are starting to feel like you are being caught up in a credit card merry-go-round, start working towards paying off one card at a time while making the minimum payments on your other cards. This way you will be eliminating your debt and eventually you will become debt free sooner than if, you had continued to pay the minimums on all your cards.
Another way to master your credit cards is to stay on top of them. Know your balances. Whether you are going shopping or making sure that a transaction has cleared. It is a good practice to check your balances. Another reason is to watch your balance for suspicious activity.
To master your credit cards may be as simple as limiting your credit cards. It may be handy to have a fistful of cards, but it is tempting and could cost your credit score. Sometimes it is better to close a credit card account down if it has a high-interest rate. Make sure the card is paid in full before you do this, though. It will have an impact on your score, but a lender looks at your file more than at your score. They will see it was paid prior to being closed.
When you begin to start mastering your credit cards, you need to watch for better deals on interest. If you have any questions about your credit cards you should always contact your customer service. Don’t be shy about it. They are there to explain and help you.
How far are you when it comes to mastering your credit cards?