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Check
out this section for tools, tips, and advice on choosing and qualifying
for a credit card, building your credit history, and ways in which
you're responsible for wise credit use.
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Choosing
a credit card
Today's consumers are presented with a wide array of credit
card choices—cards with low annual
percentage rates, cards with no annual
fees, rebate cards, gold cards, platinum cards, and so on.
So how do you choose one? Before selecting a card, be sure you know
which credit terms and conditions will apply to the account. The
Truth in Lending Act is a federal law that promotes the informed
use of consumer credit by requiring disclosures about its terms
and cost, using specific terminology. In short, the Truth in Lending
Act allows the consumer to "shop around." [top]
Qualifying
for a credit card
If you are at least 18 years old, or 21 if a permanent resident of Puerto Rico and have a regular source of income
or savings, you're on your way to qualifying for a credit
card. But you'll still have to demonstrate that you are a good
Customer. The proof is in your credit history, which lists the amount
of credit you have received and how faithfully you've paid it back.
If you are a full-time student, make sure to include that information
on your credit application. Creditors often assign full-time students
lower initial credit lines
to start their credit files. As you advance through college and
graduate school, you can always request increases to your credit
line.
Before you submit a credit application, get a copy of your credit
history to make sure it's correct. Contact a credit
bureau listed in the Yellow Pages under "credit rating and reporting."
To order a free copy of your credit
report, contact Equifax,
Experian,
or Trans
Union.
[top]
Building
your credit history
How
do you establish your credit history? Even if you've never made a
major purchase, there are ways to start building a good credit history:
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Open a checking account or savings account, or acquire a debit
card. These do not create your credit file, but their existence
will indicate that you have money and show something about how
you manage it.
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Apply for a department store credit card or a major credit card
(such as a MasterCard®, Visa®,
or American Express® Card), and use
it responsibly. Pay your credit card bills on time.
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If you don't qualify for credit on the basis of your own credit
file, ask someone with an established credit history (like a parent)
to co-sign your application. Remember, the co-signer promises
to pay your debts if you don't. [top]
Being
responsible
Because credit cards make it easy to purchase things now and pay
later, it's easy to lose track of how much you've spent. Make sure
you pay all your bills on time, and only get the credit cards you
need—don't get a card just because the issuer is giving away
a cool reward.
To establish and maintain good credit, pay at least the minimum
amount due on each account every month, and pay on time. Allow five
to seven business days for payments made by mail.
Use your credit card wisely, and you'll have a very beneficial financial
tool. Use your card unwisely, and you'll run up credit card debt
you can't afford. Nothing is easier than charging small things here
and there, only to find yourself with a large bill you can't pay.
There are easy ways to keep your spending on track. Perhaps the
easiest is to record your credit card purchases in a notebook. There
is also a wide variety of available financial software to help you manage
your finances. Lastly, take advantage of services your financial
institution offers. Through online banking, for instance, you can
see your account activity on a daily basis and even arrange to make
electronic payments.[top]
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