Credit Cards

Credit cards are perhaps the most widely used and accessible form of credit. A credit card allows you to borrow money from your bank to make your purchases like your morning coffee at Starbucks or paying for major repairs on your vehicle.  

Go to your credit union or bank and ask for the cards they offer. Compare at least three cards by reading the fine print. Things to compare include: Annual Percentage Rate, annual fees, and any benefits that come with the card (cash back, airline points, etc.).

Use your credit card for items already in your budget. A $5,000 credit limit on your credit card is not $5,000 in additional income. It is only a different way to spend money you already have. Before you start using your credit card, you will want to make sure that you are able to pay off the balance on the items you plan to purchase. We recommend using your credit card to pay for gas for your car, or your other regular transportation expenses. 

Before getting a credit card, commit to fully understand the fees and penalties associated with many credit cards. They include the following:

• If you pay late you will be charged a late payment fee. The national average for a late payment fee is $29.
• You may have a $5,000 credit limit, but your card will still work if your balance is $4,999 and you charge your $10 lunch. If you exceed your credit limit even by one cent, you’ll be hit with over limit fees of up to $39.

As you are shopping for a credit card, beware of the following:

• Bait and switch card offers. Direct mail offers generally advertise the company’s premium card at a low-interest rate, while the fine print says the company can issue a more costly non-premium card with a higher annual percentage rate if you fail to qualify for the premium card.
• Balance transfer fees. It’s the big tease. A rock-bottom introductory rate to transfer your balance, but that tantalizing low rate may come with a steep transaction fee, 3% to 5% for transferring your balance to their card. That means transferring a balance of $1,000 at 4% will cost you $40!