Credit cards - borrowing responsibly

Do you look for and switch to credit cards with lower rates? Do you check your credit report annually for accuracy? When it comes to credit cards, most Americans know that switching to a credit card with a lower interest rate is a good idea, yet one in three of us (32 percent) never bother to do it. Indeed, 29 percent say that as long as they can afford their payments, they don’t worry much about the interest rates they’re paying. That is akin to tossing money out the window. Similarly, whether you are applying for a loan or credit card, knowing what your credit report says about you will determine not just whether you get it—but how much you’ll pay for it. A survey found that while 88 percent of Americans believe that it is important to check their credit report annually for accuracy, only 57 percent actually get around to doing it.


Rules of Thumb for Applying for a Credit Card

If you have an excellent credit history, you can get a card that offers rewards and carries no annual fee. Around a third of credit card customers carry rewards cards. Most of these programs award points, “dollars” or cash value based on how much you charge. The card companies make money from fees that merchants pay when you use
the card and from finance charges and penalty fees that you pay. If you don’t have credit, you need to get some. Start by opening a bank account. Then apply for a few credit cards. (Department store or gas credit cards are usually more lenient than bank-issued cards like Visa or MasterCard.) If the creditor is reluctant to offer
you an unsecured card, you can always get a secured one with credit limits. The security comes from a deposit that you are required to make into a savings account.

Before you accept any credit card, find out:
• if there is an introductory rate, what it is and how long it lasts.
• what your new rate will be after the introductory rate lapses.
• if there is an application fee.
• if there are processing fees, annual fees, or late fees.
• whether there is an over-the-limit fee.
• if there are any other fees, like account termination fees or balance
transfer fees.
• when and how a variable rate can be changed.
• when and how a fixed rate can be changed.
• what the grace period is before interest is applied.
• how will the company inform you of any changes in your
contract.
• how the company will inform you if you are about to go over
your limit.
• what the consequences are if you do go over your limit.
• what the company policy is if you have trouble paying your bill.