Managing Credit Cards - Iowa College Access Network - ICAN

Managing Credit Cards

You're probably past the point where you think credit cards let you pay for things without really using money, but do you really understand how they work?

As you get older, you may start being bombarded with credit card offers. Some will seem like a pretty good deal. After all, paying a few bucks sounds great. Just think: you could buy some clothes, download a few tunes, maybe even get the newest cell phone now, then pay just $10 a month.

If you don't understand all of the charges and conditions, though, credit cards can be a pretty good way to get yourself so far into debt you can't get ahead for years, or maybe ever. To see how, try out the credit card calculator.

Credit Cards Are Another Type of Loan

Would you buy a pair of jeans by going to your bank and taking out a loan? Would you want to slowly pay off those jeans with monthly payments that gather interest? That could mean that jeans with a price tag of $80 might end up costing you more than $100.

If you buy items using a credit card and don't pay off the balance each month, you're pretty much doing that. Credit cards may seem like fast cash, but they're really a loan.

Credit Cards Aren't Always Bad

Credit cards can help you build credit. But you have to use them wisely; otherwise, credit cards can also hurt you financially. Use these tips to make credit cards work for you.

  • Limit your number of cards. The more credit cards you have, the more likely you are to charge too much. Having a lot of cards in your name can also hurt your credit.
  • Be careful with store cards. Store cards good only at a specific shop often have high interest rates and less-desirable terms. Saving 10% on today's purchase seems great, but there's a reason they're making the offer. They're hoping to make more money on you later through interest on your balance.
  • Pay attention to the balance. Always know how much you've charged on your card and never charge more than you can pay off.
  • Pay the balance in full. Credit cards usually charge you interest on the balance you carry over each month. Paying in full each month means you won't be charged extra money. If you can't pay off your balance, at least pay more than the minimum due.
  • Understand all the terms of your credit card. Besides interest, credit card companies also make money by charging various fees. Read your agreement (it's that pamphlet of really fine print you got with your card) closely and be sure you understand all the fees that may apply. This will also help you apply for the card that is most beneficial to you. Some credit cards offer benefits that can be useful if you're careful. Read definitions of credit card terms.


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