Credit cards offer consumers many benefits, such as improving credit scores and providing rewards like airline miles, bonus points and cash back. However, using credit cards unwisely can easily land consumers under a mountain of debt. The following guide contains a collection of tips designed to protect consumers and their credit scores while still allowing them to enjoy all the benefits that credit cards have to offer.

How Consumers Can Protect Their Credit
It is important to always make payments on time. If not, it is possible to be hit with late fees of $30 or more. Late payments can also trigger an interest rate increase, even for good customers. Late or missed payments can sometimes find their way onto credit reports and lead to higher interest rates on other loans.

It is not necessary to have many different credit cards. Ideally, consumers should limit themselves to between two and six cards. Applying for too many cards can damage credit scores.

When signing up for a new card, always read the fine print so that it is clear what the interest rate is, when the payments are due and what the credit limit is.

Do not automatically settle for the interest rate that is offered. Consumers with high credit scores (usually 700 or above) may be able to negotiate a lower rate than they were initially offered.

Never spend more than 30% of the available credit limit. When credit bureaus see that too much credit is being utilized, it raises red flags and can result in a lower credit score.

Watching Out for Hidden Catches
Before applying for a balance transfer to a new card with a lower interest rate, always find out exactly how much it will cost in fees. It is also important to insist that the transfer be done electronically to avoid being stuck paying interest on both cards in the meantime. Paying attention to the terms is also vital because many introductory rates on balance transfers do not apply to new purchases.

Rewards cards can be attractive, but they often have hidden catches. For example, the higher interest rate may offset any potential rewards.

“Convenience” checks may sound attractive, but they come at a hefty price. Expect to pay at least 3-4% of the amount written in fees. Worse yet, the high interest rates have no grace period.

Even with credit card protection insurance, consumers are still on the hook for interest that continues to accrue on any outstanding balance because the insurance only covers the minimum payment.

The best strategy of all
Remember that credit is not a gift. It is a loan that must be paid back. Never purchase anything just because it is possible with a credit card. Only purchase those things that would still be purchased if one was paying cash.

Finally, the best way to avoid all the interest, transfer and other charges is to simply pay the balance off in full every month. Why add extra charges that will only increase the purchase price in the end?

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Category: Finances
Keywords: credit cards,debt,saving, money, personal finance,budgeting