If you do not handle your credit wisely, you could get burned. The following seven tips can help you find the right credit card.
1. Understand your credit. Credit card issuers base your credit application on a number of factors including: your past use of credit, the types of credit used and your open accounts. Your credit score is based on your credit history and is a three-digit number that essentially grades your progress.
Know your credit score first before applying. It can be obtained from each of the three credit reporting bureaus or by visiting MyFico.com. The higher your credit score, the better your chances for getting approved and with favorable terms.
2. Read your application carefully. Credit card applications say a lot, but just as easily you might skip over the finer points. You need to review your application closely to determine what fees are charged, the length of the grace period and understand what happens if you make a late payment. Some of the terms may be negotiable, therefore ask the credit card provider for specific terms.
3. Separate your business accounts from your personal accounts. If you are applying for a business credit card, make sure that the card is opened in your business’ name, not your own name. Use your Employer Identification Number (EIN) instead of your Social Security Number to establish separate records for your company. If there is a problem with your business, you do not want creditors to come after your personal assets.
4. Pay off your balances monthly. You can avoid paying interest on your credit cards by paying down your balances every month. If you get in the habit of allowing balances to build up, you will dig yourself in a financial hole. Paying off your balances will also help raise your credit score.
5. Understand how rewards work. Some credit cards come with rewards, giving consumers an incentive to use these cards. Often, the rewards are points for every dollar spent, redeemable for cash back or for other prizes. The effectiveness of rewards cards is canceled if you maintain an account balance. Get the full benefit of your rewards by paying off your credit card monthly.
6. Be mindful of credit card fraud. With credit comes fraud. Review your credit card statement monthly to verify that each charge to your account is for something that you purchased. Notify the credit card provider upon discovering incorrect information. Obtain copies of your credit reports and review each one carefully. Get a handle on fraud and you will avoid worse problems later.
7. Keep a handle on all of your debt. You pay your credit card off monthly, but you are not so diligent with some of your other payments and obligations. Creditors share information about you with each other, therefore your credit card terms could change for the worse if you are irresponsible with your other accounts.
Credit Considerations
It is almost too easy to get credit, making it possible for consumers to get in trouble if they do not diligently manage their accounts. If you are simply looking for a better card, consider asking your current credit card provider for more favorable terms or to have your account transferred to a rewards card.
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