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Credit Card Do's and Don'ts

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Clearly, there is a lot to know about credit cards, and it is not all bad. Here is a list of do's and don'ts that will help you maintain a good credit experience:

1.Make credit card payments on time. It is important to your overall financial health that you make your payments on time, every time. This means making payment on or before the due date and, sometimes, making payment before a specified time on the due date. Late payments will cost you money! Your interest rate will increase and your finance charges will go up. Many lenders have severe penalty pricing policies. If you miss one or more payments in a 6 or 12 month period, your interest rate can go as high as 27% or more.

2.Pay more than the minimum each month. At the very least, you should make the minimum monthly payment indicated on your statement. Paying this amount will allow you to maintain a good credit history, but it will also keep you in debt longer. The minimum payment is usually 2% to 2.5% of the balance. Paying your balance off at this rate could take years, 30+ years in fact, depending on the balance and the interest rate. A good guideline for controlling your credit card debt is to avoid charging items that you cannot pay off in 3 months or less.

3.Do not kite payments. Kiting is process of borrowing from one lender to pay another with no money actually coming from the cardholder. People frequently resort to kiting when they become overextended financially. They will get a cash advance from one card and use the funds to pay another card. Then, they will do the same thing the following month. Kiting is illegal and is a federal offense.

4.Don't charge food. Another guideline is to avoid charging food and other incidentals. It is generally not acceptable to charge meals, cigarettes, drinks, etc. Would you like to spend a year or more paying off groceries or that pizza you just charged? The exception to this rule is that it is okay to charge these items if can pay them off, in full each month. That said however, the majority of people who charge these items are not in a position to pay the full balance each month.

5.Do not apply for credit cards that charge an annual fee. Many credit cards have annual fees. These fees are charged on the anniversary date (the date the account was originally opened) and are added to the balance. If you carry a balance, you are already paying the financial institution interest on the money you owe. There is no need to pay a fee for merely having the privilege of using a bank's credit card.