1. Avoid accepting too many offers. There is rarely a good reason to carry more than one or two credit cards. You should be very selective about choosing cards which are best for you. Having too much credit can lead to bad decisions and unmanageable debts.
2. Remember that lenders are looking for people who will run up big balances, because those consumers pay the most interest. You may find that credit companies are pursuing you aggressively by mail and phone. You should not view this as a sign that you can afford more credit. The lender may have a marketing profile based on your spending patterns, your credit record, your use of certain services such as home shopping, your magazine subscriptions, or even your zip code, which indicates to them that you are someone who is likely to carry a big credit card balance and pay a good deal of interest.
3. Interest rate is important, but not the only consideration. You should always know the interest rate on your cards and should try to keep the rate as low as possible. However, it is rarely a good idea to take a new card solely because of a low rate. The rate only matters if you carry a balance from one month to the next, and a temporarily low rate may encourage you to spend more than you can afford. In addition, the rate can easily change, with or without a reason. Remember that even the best credit card interest rates are relatively high rate credit.
Additionally, other terms of credit may add to the cost, so that a credit card which appears cheaper is actually more expensive. Annual fees, late charges, membership fees, and the method by which balances accrue can add to the cost of credit.
4. Beware of temporary “teaser” rates. A teaser rate is an artificially low initial rate which lasts only for a limited time and often for limited charges, such as transfers of balances from other cards. Most teaser rates are good only for six months or less. After that, the rate automatically goes up. Remember that if you build up a balance and pay it after the period of a temporary rate, the much higher permanent rate will apply to your repayment plan. This means that the permanent long term rate on the card is much more important than the temporary rate.
5. If your rate is variable, understand the basis on which it may change. Variable interest rates can be very confusing. Some variable rates conceal terms which ensure that your rate will go up steeply over time. Read the credit contract to understand how and when your rate may change.
6. Be careful about juggling cards to take advantage of teaser rates and balance transfer options. It takes a great deal of time and effort to juggle cards to take advantage of terms designed to be temporary. Remember that all teaser rate offers are designed to get you locked into the higher rate for the long term, because that is how the lender makes the most money. Even people who do successfully juggle many cards complain that use of numerous cards has a long-term negative impact on their credit record.
7. Investigate terms related to late payment charges and penalty rates of interest. Many credit card contracts, including those which advertise low permanent rates have provisions in the small print to increase your rate of interest if you make even a single late payment. This may be on top of late charges or other penalties. You should review your contract to see if such terms apply.
8. Learn your credit card’s billing method. It is important to understand how you will be billed. If interest will apply from the date of your purchase without a grace period, a low rate may actually be higher than it looks. If you intend to pay off the balance in full each month, terms of the grace period are important. You need to understand how the grace period works and remember that many lenders do not mail bills until late in the grace period. Your payment may be due quite soon after you receive the bill in order to avoid additional accumulation of interest.
9. Always read both the disclosures and the credit contract. You will find disclosures about the terms of a credit card offer, usually in small print on the reverse or at the bottom of the offer. Review these carefully. However, the law does not require that all relevant information be disclosed. For this reason, you must also read your credit contract, which comes with the card. This will include terms such as late payment fees, default rates of interest, and a description of the billing method. You have several choices if you do not understand these terms. You can call the lender for an explanation. Or better yet, refuse credit with too many complex provisions, because those terms are likely to work to your disadvantage.
10. If you do take a credit card and discover terms you do not like: Cancel!
[source: national consumer law center]
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