CreditShack.org

Do:

• Comparison shop for credit cards. Not all credit cards are created equal. When looking for a new credit card, shop for it online. The Internet is a powerful tool for consumer research. Use it. Make sure you understand all the terms and fees before applying for any card.
• Apply for credit sparingly. Each time you apply for a credit card, the creditor notes your request for new credit on your credit report. Too many applications in a short period of time throw up a red flag, which can hurt your credit rating.
• Sign your credit cards immediately. Sign your credit card the moment you receive it to provide protection against criminal misuse.
• Make on time payments. On time payments work wonders for your credit score and keep your interest rates low.
• Every month, pay off as much of your balance as you can. It’s best to pay your balance in full every month. If you can’t do that, pay as much as you can afford. When deciding what to pay, don’t start from the minimum and work up from there. Start with your outstanding balance and if necessary adjust down to the highest payment you can afford.
• Pay online. Most credit card companies allow you to send your payments electronically online. It’s fast and secure, and you don’t need to worry about your check getting lost in the mail.
• Take advantage of special balance transfer offers. Zero percent or low-interest balance transfer offers help you pay down your debt more quickly. Read the fine print to make sure you understand the terms and fees. Small balance transfer fees are okay if the lower interest rate saves you money in the long run.
• Pay off your highest interest-rate cards first. If you owe money on more than one credit card, pay as much as you can toward the balance with the highest interest rate. Pay only the minimum on all the others. Mathematically, this is the fastest and cheapest way to get out of debt. (Balance is irrelevant when apportioning your payments. Only interest rate matters.)
• Check your credit report at least once or twice a year. Monitor your credit record to ensure that no errors have been made and to watch for signs of identity theft.
• Keep your credit card numbers and customer service telephone numbers in a safe place. In the event that your card or wallet is stolen, you’ll need to notify your credit card companies of the theft immediately. To make this process easy, keep a list of your account numbers and the customer service lines in a safe place separate from your cards.
• Use temporary card numbers. Most credit companies offer free single-use temporary card numbers for online shopping. They work just like your normal credit card, except that the number is only valid for one transaction. If the number is compromised, the thief cannot use the card. Although your money is always protected from fraudulent card use, using single-use card numbers cuts down on the hassle of dealing with card theft.
• Use your credit card for your purchases while traveling internationally. Credit cards generally offer the best currency exchange rates available. The foreign currency conversion process is automatic.

Don’t:

• Max out your credit cards. Try not to let your balance exceed 30% of your credit limit. High debt-to-credit ratios impair your credit score. Also, banks have been known to reduce credit limits without warning. If the bank lowers your credit limit to an amount below your balance, you will be charged an over-the-limit fee. Is this “sliding limit” practice fair? No. Is it avoidable by keeping your balances fairly low? Yes.
• Pay late. Late payments hurt your credit score and can cause your interest rate to increase to a penalty “default” rate. Furthermore, many credit cards subject you to a “universal default” policy, which allows them to raise your rate if you pay any of your creditors late. One late payment to one credit card could raise your rates for all of them.
• Open too many credit card accounts. In most cases, it is unnecessary to have more than two or three credit card accounts. Excessive accounts can be difficult to keep track of, making it easier to slip into debt or accidentally make a late payment.
• Use a balance transfer card for purchases. If you took advantage of a 0% or low interest balance transfer or cash advance offer, don’t use that card for anything else. Different interest rates usually apply to purchases and balance transfers. Banks apply your monthly payments to the balance with the lowest interest rate. Great for the bank, but horrible for you. Your goal is to pay off the highest interest rates first, not the lowest. Consider the following example: Let’s say you made a $10,000 balance transfer at 0% and subsequently made $2,000 in purchases at 12%. Your entire monthly payment will go towards your 0% balance transfer balance, while your $2,000 in purchases will accrue interest at 12%. Not good, is it? If you take advantage of a special balance transfer offer, you shouldn’t use the card for anything else.
• Use a rewards card if you are in debt. Rewards cards only benefit those who avoid interest charges by paying their balances in full every month. Rewards cards typically have considerably higher interest rates than non-rewards cards. What good is 1% cash back if you’re paying 5% more interest? What good is a free $200 plane ticket if you paid $1,000 extra interest to “earn” it?