Why You May Need Credit:

You can use a credit card to buy things and pay for them over time. But remember, buying with credit is a loan — you have to pay the money back. In addition to the cost of what you bought, you will owe a percentage of what you spent (interest) and sometimes an annual fee.

You may need credit for immediate reasons, such as:

• Renting an apartment or car
• Getting phone service and utilities service
• Financing a car or home
• Paying for school expenses
• Spreading out payments on high-dollar items
• Travel or hotel reservations

By establishing a good credit history, you’ll have access to credit later on for things like the following:

• Buying a home
• Applying for a job
• Qualifying for loans for purchases including cars, furniture and wedding expenses
• Making urgent repairs to your car or home
• Getting emergency medical care for you or a family member
• Internet purchases

Know What Creditors Look for on Credit Reports:

Understanding what types of information most creditors evaluate is important. Your credit report is a key part of your credit score, but it is not the only factor. Other factors are taken into consideration, such as:

• Paying your bills on time
• How many accounts you have and what kind
• Longevity of accounts
• The unused portions of lines of credit
• Collections actions
• Current total of outstanding debt

Terms You Need to Know:

Annual percentage rate (APR). The APR is a measure of the cost of credit, expressed as a yearly interest rate. Usually, the lower the APR, the better for you. Remember that the interest rate and minimum monthly payment affect how long it will take to pay off your debt and how much you will pay for your purchase over time.

Grace period. This is the time between the date of the credit card purchase and the date the company starts charging you interest.

Annual fees. Many credit card issuers charge an annual fee for giving you credit, typically ranging from $15 to $55.

Transaction fees and other charges. Most credit card issuers charge a fee if you don’t make a payment on time. Other common credit card fees include those for cash advances and going beyond the credit limit.

$0 Fraud Liability. You are not responsible for unauthorized charges made on your account, regardless of whether they are online or offline. There is no deductible for this program.

Other options. Credit card issuers may offer other options for a price, including discounts, rebates and special merchandise offers. If your credit card is lost or stolen, federal law protects you from owing more than $50 per card.

Paying Your Bill:

If you carry a balance on your credit card, the lower the annual percentage rate (APR) of your card, the less you will pay in interest or finance charges during a given year. In short, if you never pay your bill in full and the features and benefits of all your cards are the same, the one with the lowest interest rate will save you the most money over time.

If you always carry a balance, making your monthly payment early in the billing cycle (even before the stated due date on the billing statement) will also save you money.

Why?

Because most credit card issuers use the average daily balance method to figure monthly interest or finance charges. If you make your monthly payment early in the billing cycle, you reduce the daily balance for more days in that cycle. This also reduces the total balance used to figure the average daily balance for that month.

If you only use your credit cards for purchases and you pay your monthly bills in full each month by the due date, you will avoid all interest charges.

Protecting Your Credit:

Once you have obtained credit, it is necessary to protect it. This means being careful with your credit, debit and ATM cards, as well as your account and personal identification numbers (PIN). Following these tips will help to ensure your credit is protected.

• Carry only the cards you expect to use, and keep the others in a safe place.
• Maintain a list of account and telephone numbers of the companies that issued your cards. That way, if the cards are lost or stolen, you can notify the companies quickly. Be cautious about giving anyone your account numbers, especially over the telephone when someone calls you.
• Save sales receipts to compare with your bill, and when you discard documents with account numbers on them, be certain that the numbers can’t be read.
• If you disagree with an item on your credit card billing statement, you are responsible for notifying your credit card issuer in writing within 60 days of the date of the statement. You should include your name, account number, the item you believe is in error and the reasons why.