Using Credit Wisely

Try to make more than the minimum payment!
Why is this important? If you stick to the minimum amount due to pay off a balance of $1,000 on a card with an 18 percent annual interest rate, it would take you more than 12 years to pay it off. During that time, you would also pay $1,115 in interest charges. That is more than double the original balance. So, that shirt you got on sale for $19.99 really cost you $39.98.

If you get a credit card, just be careful. The very first time you pay less than the minimum payment on your bill, it shows up on your credit report. The first time you're late paying a bill, it's there. Every time something goes wrong it's noted in your credit report.

And, don't get greedy...

Every time you sign up for a credit card just to get that free t-shirt it's recorded. Too many inquiries into your credit can be a bad thing.

Helpful Hints for Credit Card Use:
Try to restrict your credit card use to only one or two cards.
Use credit wisely. Ask yourself the following questions before purchasing with credit: Is this something I need? Do I need it now? Do I have the ability to repay? How long will it take me to repay? How much will it ultimately cost me?
Make sure that monthly debt payments do not exceed 20 percent of your monthly net income.
Shop around for credit cards with low interest rates, low annual fees and reasonable grace periods before finance charges begin.
Pay the entire balance when it's due and review your spending habits to cut unnecessary purchases.
Pay your bill as soon as you get it, and if you can't pay the entire balance, pay more than the minimum amount due when possible.
When you use credit to pay for an item, write down the amount and subtract it from your funds to ensure you can pay the amount at the end of the month.
Never lend credit cards to friends or leave cards or receipts lying around where people can find them.
Think ahead. Be proactive, not reactive, about your finances. Plan for different obligations now and after graduation.
Keep a list of your credit card account numbers and phone numbers in a safe place in case a card is lost or stolen. If a card is lost or stolen, report it as soon as you notice it is missing.


If you're already in way over your head check out these tips to see how to get out of debt without giving up food.

How to Avoid Debt
It is a good idea to get into the habit of asking yourself ten questions every time you consider purchasing something on credit:

Do I really need this item right now or can I wait?
Can I qualify for credit?
What is the interest rate (APR)?
Are there additional fees?
How much is the monthly payment and when is it is due?
Can I afford to pay the monthly payments?
What will happen if I don't make the payments on time?
What will be the extra cost of using credit?
What will I have to give up to pay for it?
All things considered, is using credit worth it?