Using a credit card is easy. Grasp it between your thumb and forefinger, swipe it through a reader and, like magic, your purchase is rung up. However, being a savvy credit card customer -- one who deftly avoids burdensome balances while enjoying all the perks offered by credit-issuing companies -- takes a bit more effort, engaging multiple body parts, so to speak. This handy credit card anatomy chart shows you what you need to know to keep your debt load low and your credit score safe.
Using a credit card is easy. Grasp it between your thumb and
forefinger, swipe it through a reader and, like magic, your purchase is paid
for. However, being a savvy credit card customer -- one that deftly avoids
burdensome balances while enjoying all the perks offered by credit-issuing
companies -- takes a bit more effort, engaging multiple body parts, so to
speak. This handy credit card anatomy chart shows you what you need to know to
keep your debt load low and your credit score safe.
1) Keep your eyes openRead your statements closely each month. Better yet, check
in on your
credit card online every week, or at least bi-weekly, which can help
you stay on top of fraudulent charges. Some cards, such as Capital One, offer
an e-mail alert system where you can receive a message when a charge is made --
if your card offers such a benefit, take the few minutes to sign up and take
advantage. The faster you know that a criminal has stolen your digits, the
easier it is to mitigate the damage.
2) Speak upDon't like a sudden change in terms on your card or want a
larger credit line?
Say something. Although the Credit CARD Act of 2009 may
have crimped your ability to negotiate, you may have more luck than you expect,
says David Jones, president of the Association of Independent Consumer Credit
Counseling Agencies (AICCCA).
"The credit card market is saturated -- everyone who wants a
credit card has one, maybe two or three," he says. "The only new customers
companies can get is by stealing from each other. That's why you're getting all
those solicitations in the mail; that's an indication that they're anxious to
get new clients and to keep the ones they have."
When you call, keep track of who you speak with, and if you
don't get the answer you want, "escalate the conversation to a supervisor or
manager," Jones suggests. "Very often, you'll have some success."
3) Be hands onIf you're like most consumers, you have both a debit and
credit card (or cards) in your wallet. Unless you're following a strategy of
collecting credit card points -- and paying off the bill in full every month --
you'd be wise to err on the side of swiping your debit card more often. "Use
credit only when you really need to use it," Jones says. "The smart thing to do
is to know what you need to charge for and be prepared to pay it back in short
period of time, if not the same month when you get the bill, then certainly
within three months."
Gail Cunningham, vice president for public relations at the
National Foundation for Credit Counseling (NFCC), says there are two exceptions
-- when you need to build your credit history, and when you're making a large
unexpected purchase, such as when an essential appliance goes on the fritz or
your car conks out and needs repair. "Responsible credit card use will help
your credit score, whereas your debit card activity may or may not be reported
to the bureaus," she explains.
4) Don't always follow
your heartAre you a
compulsive shopper? You're not alone. Take solace
in the tale of Karla Schneeberger, a freelance journalist from Colorado
Springs, Colo., who innocently walked into high-end boutique Henri Bendel
during a trip to New York City and walked out with $500 worth of makeup that
sat under her bathroom cabinet for two years before ending up in the trash. "I
wound up buying so much stuff from the Laura Mercier counter that the makeup
artist actually gave me her home phone number," Schneeberger admits.
So often people let their emotions take over when making
buying decisions, Cunningham says. "I've been in consignment stores and see
clothes with the original tags still on them. If that's you, you need to crawl
inside your psyche and try to understand what void you are trying to fill
through shopping. Be honest with yourself."
Of course, sometimes
you do need to make purchases, and when you do, it's important to shop with a
firm plan of what you need -- and a ceiling on what you're going to spend.
5) Strong-arm your score
[point to biceps on illustration of person]
Your spending and payment decisions should always be done
with building up your credit score in mind. "Never miss a payment," Jones
instructs. "Always make those payments on time. That will have the biggest
impact on your creditworthiness and your credit score and on your own financial
health. Also, pay more than the minimum."
In fact, your timeliness in bill payments accounts for 35
credit scoring models, making it the highest weighted element,
according to Cunningham. The next highest weighted, at 30 percent, is how much
of your available credit you've used. "Don't max out your card," she says. "The
savvy consumer will only utilize 30 percent of his or her available limit, or
6) Get a leg up on your
finances [point to thighs or knee area]
Sometimes, the smartest thing you can do with your credit is
to not use it. "Don't live off your credit, and don't rely on it as if it is
your piggy bank," Cunningham advises. "Make sure you have savings, and
contribute to it."
That strategy is especially important in times of financial
stress, such as a job loss, she adds. "People think a new job is just around
the corner, and they don't adjust their lifestyle," she says. "They live as
though they still have income, and charge their expenses, and before long
they've dug a very deep financial hole." Instead, Cunningham recommends rolling
back spending and turning to savings accounts that should be built up during
more prosperous times.
7) Stay on your toesLoyalty is often an admirable trait, but it could hurt you
when it comes to credit cards. While it's not good to switch your card
allegiances too often, don't be afraid to walk out on a card that's ratcheting
up your fees and interest rate unfairly.
"If you jump around every two to three months,
canceling one card and taking another, that will show up on your credit report," Jones says.
"Credit grantors not only look at your FICO score, they also look at your
credit report -- they want to see what kind of spending habits you have. So
it's probably not a good idea to shift cards often. However, it is also
important to get the best deal you can."
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