12 Tips for Managing Your Credit Cards

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Licensed Mortgage Professional #206048
Fairway Independent Mortgage Corp.
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12 Tips for Managing Your Credit See Tucson Real Estate Sue Pullen

This year, what’s a better feeling than putting a shiny new credit card in your wallet?  Tucson has so many fun things to do and see, it’s nice to have a little spending money.  Here are 12 tips for obtaining a credit card and not misusing it.

#1 Know where you stand
What credit card interest rate and credit limit you qualify for relies on your credit history. But many people have no clue how good or bad their credit is. To keep the surprises to a minimum, pull your credit report from the three credit reporting agencies. You can get a credit report from each agency every 12 months at AnnualCreditReport.com for no cost.

These reports will show your account history, including things that can hurt your credit score, like habitually late payments, short credit history or high utilization, which is when you've used a large amount of your available credit. The more strikes you have against you, the more likely it is that you won't get the best interest rate.

#2 Improve your chances
If you can wait to apply for a new credit card, spend at least six months getting your credit affairs in ship shape. Use your credit report as a guide.

First, make sure there is no inaccurate information on your credit report. If there is, you will need to contact the credit reporting agency and the company that runs the account to get the record straight.

Next, look at the key factors hurting your credit. If late payments are a problem, then commit to staying current on all bills. If your utilization rate is too high, commit money from your monthly budget to reduce lingering debt as much as you can.

#3 What benefits do you want?
Your credit is straightened out, and you want a credit card. Now what? Determine what type of benefits you want.

If you are travel a lot, consider cards that are linked with hotels or airlines and allow you to rack up rewards points that can be used to buy flights or hotel stays. For road warriors, there are several different gas rewards cards available. For those who want to earn cash from their purchases, issuers have unleashed several types of cash-back rewards cards.

Other perks to consider: cards with low or no balance transfer fees, cards with low penalty or late fees and specialty cards such as secured, retail or prepaid cards.

#4 Compare similar cards
Consider which credit cards charge an annual fee. Will a card's rewards cover its annual fee? Would fewer perks be okay as long as the card has no fee?

Also look at the annual percentage rate, or APR. Is there a special low introductory rate that increases after six months? Is the interest rate variable or fixed?

The card with the lowest APR is not necessarily the best for you. Take into account penalty and late fees, especially if you've been known to miss payments. And look at other fees, such as balance transfer fees or foreign transaction fees, which could make the card less attractive.

Also, be sure to read the restrictions on rewards programs. For frequent-flier cards, there may be blackout dates. Cash-back cards might have a limit on how much you can earn each month.

12 Tips for Managing Your Credit See Tucson Real Estate Sue Pullen

#5 Other credit card benefits
Some credit cards come with perks other than their rewards programs, so it pays to read the fine print. Here are a few benefits you should consider:

•    Roadside assistance: Some cards will come to your rescue if you're stranded on a desolate highway with a flat tire. But there may be geographical limitations or time-of-day limits.
•    Purchase protection: Some cards come with return protection in case a retailer won't take back a recent purchase. Others offer extended warranties on top of a manufacturer's warranty or protection against theft or accidental damage of the item.
•    Travel assistance: Some credit cards will coordinate medical care or legal aid if you are traveling abroad. Others will cover airline fees, such as checked-bag fees, or offer access to airport lounges. Car rental, travel accident and trip-cancellation insurance are other popular perks.

#6 Declined? You'll find out why
New federal rules that went into effect last July require creditors to disclose the credit score used to make a lending decision, along with information related to the score if a customer is denied or given adverse terms.

The decline notice will provide the credit score, the range of possible credit scores under the model, up to five things that hurt your score, the date the credit score was created and the credit reporting agency that provided it.

Armed with that information, consumers can figure out how most effectively to raise their credit score by tackling the key reasons the score was lower. Then, try applying again in six months.

12 Tips for Managing Your Credit See Tucson Real Estate Sue Pullen

#7 Cards for people with spotty or no credit
If your credit is flawed but you need a credit card right away, you have two choices. Apply for a secured credit card, or become an authorized user on someone else's card.

A secured credit card requires a deposit, usually from $300 to $500, as collateral to use it. The deposit is put into a savings account, certificate of deposit, or a money market account. Often, after a year of good payment history, the issuer may turn the secured card into a regular credit card.

Another option is to piggyback on someone else's credit card such as a parent or spouse. They can add you as an authorized user without the need to qualify you first. The bonus: Most credit bureaus will include only good payment history on an authorized user's report, which will help lift your credit score.

#8 Leave a good track record
It may be appealing to just pay the minimum every month because it seems like less money out of your pocket. But with interest rates between 13 percent and 15 percent, a minimum payment will only expand what you owe. So the rule of thumb is to spend only what you can comfortably pay off each month.

Secondly, always pay your bill on time. Set up automatic payments if you tend to be forgetful. Consistently paying on time is one of the best ways to boost your credit score, which can make you eligible for lower interest rates.

Third, mind your credit limit. One of the factors used to calculate a credit score is how much credit is used versus how much is available to you, which is called the utilization rate. The lower the utilization rate, the better your score.

#9 Credit card regulations are your friends
There are two big regulations that cover credit card practices and billing: the Credit Accountability, Responsibility and Disclosure Act, or CARD Act, and the Fair Credit Billing Act.

The CARD Act eliminated many common, yet questionable, credit card practices such as retroactive rate increases, double-cycle billing and applying payment to lower-rate balances first. It also required more advance notice for rate hikes and placed caps on fees that issuers can charge.

The Fair Credit Billing Act outlines your rights as a cardholder when you have a billing dispute with your creditor. For example, it limits a cardholder's liability for unauthorized charges to $50.

#10 Be virtual friends with your card
Many credit card companies offer special promotions on Facebook, Twitter, Foursquare and other social media sites to boost cardholder loyalty. Other issuers are using these forums to address customer service complaints or determine charitable giving.

So if you haven't already, friend or fan your credit card issuer on Facebook, and follow your card on Twitter.

#11 Keep tabs on your credit card
A credit card can become a threat to your financial security if it lands in the wrong hands. Here are some tips to help keep your credit card safe and sound.

•    Check your credit card accounts regularly online, so you can spot unusual transactions. Set up mobile text alerts if your bank offers them.
•    Don't use public computers to make credit card purchases, access your financial accounts or check the email account where the bank sends information. Public computers are vulnerable to hackers.

12 Tips for Managing Your Credit See Tucson Real Estate Sue Pullen

•    Avoid unfamiliar online vendors. Stick with established ones.
•    Don't give your credit card information to an unsolicited phone caller or emailer. Always contact your bank using the customer service number on the back of your card.
•    If you notice suspicious transactions, call your local police and your bank. Also, let the three credit reporting agencies know about possible fraud on your account.

#12 When trouble strikes
You might have difficulty paying your credit card bill someday. If you foresee your financial situation slipping, here are a few ways to make good on your credit card.
First, contact your creditor and explain your financial situation. In many cases, the creditor will set up a temporary hardship payment plan until you get back on your feet. Never stop paying and never ignore collection calls. Your debt could follow you all the way to court.

Also, consider seeking help from a dependable nonprofit counseling service. You can locate one through the National Foundation for Credit Counseling. A counselor can help you reconfigure your household budget and set up payment plans with creditors.