INTEREST RATE: A credit card interest rate is also known as the Annual Percentage Rate (or APR). The interest rate for a card determines how much money the credit card company will charge you for allowing you to borrow their money for each month.
Read the terms and conditions of your credit card and ensure that you have at least a 30 day grace period for new purchases before interest begins being charged.
The lower the interest rate, the less money you will be paying the credit card companies each month.
ANNUAL FEES: Some credit cards actually charge you an annual fee (sometimes even up to $75 or more) for the privilege of using their credit card. With the number of credit card offers available in today’s marketplace, there is no reason to pay an annual fee for a credit card.
Many credit cards have zero annual fees and will still provide you with the other benefits of having a credit card – such as increasing your credit score
through good credit history. If you really want a card that is charging an annual fee because it has other benefits such as cash back rewards, do a quick calculation to see if you will earn more in the rewards than you will pay in annual fees each year.A credit card will help you improve your credit score if used wisely. However, if you do not understand how a credit card works, then it is possible to actually lower your credit score by using credit cards.
Here is a quick list of tips to keep in mind when using credit cards to raise your credit score.
- Pay your balances each month – keep a balance of between 0%- 10% on your card
- Make all of your payments on time, paying at least the minimum payment on each card every month. Try to get in the habit of paying a couple days early in case there are errors in processing your payment.
- Avoid cards with annual fees as they can lower the overall amount that you have to put towards paying off your credit cards.
- If you can’t get a credit card on your own, cosign with someone else. This will help build your credit score along with theirs – just make sure the payments get made on time.
- Do not cancel your credit cards – even if you are not using them. The longer you have an account open, the longer your overall credit history and average account age will be. This will increase your credit score over time.
- If you are paying a high interest rate, call your credit card companies and ask for a lower rate. The worse that will happen is that they will say no – however, they might say “yes”!