Tips for Smart Credit Use

Credit isn't all bad. In fact, establishing good credit as a student can help you get the best rates on auto insurance, rent an apartment or buy a home, and avoid deposits on utilities or other services. The key to managing credit is to not to get trapped in the mindset of "I'll buy now and pay later." When you do borrow, you want to ask yourself how and when you'll repay the debt - and how much it will cost you.

• Shop around for the best credit card interest rate. Consider using one card for balances that you'll pay in full and another card with a low interest rate for times when you need to carry a balance. A list of student credit cards is available at www.fcac-acfc.gc.ca.
• Don't pay interest on items you don't really need, or for things that will be gone by the time you get your bill. Otherwise, it's like buying that item marked up instead of marked down!
• Read your credit card agreements and the correspondence you get from issuers. There may be important information in them. For example, credit card issuers can generally change your interest rate with only 30 days written notice – even on a card with a fixed rate.
• Always mail your payments for your credit cards at least 5 business days before the due date. Your interest rate on new purchases as well as any current balance may be raised to a very high rate if you are late.
• If you pay your debts late, a late payment will likely to be reported to the major credit bureaus and will stay on your credit report for seven to ten years. Your other credit card issuers may raise your interest rates if they see you are falling behind on other accounts.
• Call your issuers if you can't make a monthly payment on time. Ask them about alternative payment arrangements without damaging your credit or raising your interest rate.
• Notify your credit card issuer 30 days before you move, and don't assume that just because you didn't get a bill you don't have to pay it. If a bill doesn't arrive, call your card issuer or lender immediately.
• Try to pay off your total balance each month. Just paying the minimum is a trap: If you pay off a $1000 debt on a card with an 18% interest rate, it will take you more than 12 years to repay.
• Aim to keep your debt payments at less than 10% of your income after taxes. If you take home $750 a month, spend no more than $75 a month on credit.

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johnbobcan wrote:	Also finding a no-fee card with rewards, any reward such as cash back or points, is helpful, although don't buy anything just for the reward points, EVER!!! Use it for normal purchases and pay it back by the due date always, then get free stuff too! Posted on Aug 11, 2011 at 09:53

 

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