By Consolidated Credit Counseling Services of Canada
With so many young people having credit cards these days, the risk of getting into debt trouble is greater than ever. Don’t be tempted to get in over your head. Here are some tips for handling your credit wisely:
1. Remember that credit is a loan that you must repay.
Before you apply for your first credit card, decide what you will use it for and more importantly, how you will pay the bill.
2. Take your time.
Start with one card with a low credit limit, and use it responsibly before you even consider getting another.
3. Shop around for the best deal.
Check out www.BankRate.ca for some great advice on credit card deals.
4. Study your card agreement closely.
Always read the fine print on the inserts enclosed with your bill. Credit card offers differ substantially, and issuers can often change the terms at will, with 30 days notice.
5. Try to pay off your balance each month.
Sure, you can just pay the minimum, but you’ll be surprised at how quickly those finance charges add up. If you owe $1,000 on an 18% card, for example, and you pay only the minimum each month, it will take you over 12 years to repay the balance.
6. Pay your bills on time.
Even one late payment can put a black mark on your credit record and might cause your issuer to raise your interest rate to the maximum allowed under your agreement.
7. Set a budget and follow it.
A good rule of thumb is to keep your debt payments less than 10 percent of your after-tax income. If you take home $750 per month, for example, you should spend no more than $75 a month on credit card payments.
8. If you move, notify your credit card company immediately of your new address.
9. If you know you are going to be late on a payment, call your issuer immediately (before the payment is late).
In most cases, the issuer will work with you to make payment arrangements that won’t affect your credit rating.
10. Make it harder to spend.
At the first sign of credit card overuse, such as using one card to pay off another, make your credit cards harder to use. Stop your spending by cutting up your cards or giving them to your parents for safekeeping.