Financial Literacy for Everyone

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Credit Cards

Credit cards offer many advantages. There is the convenience of being able to buy needed items now and the security of not having to carry cash. You also receive fraud protection and, in some cases, rewards for making purchases.

With these advantages also come responsibilities. You need to manage credit cards wisely by understanding all of the card's terms and conditions, staying on top of payments and developing awareness of the true cost of purchases made with credit. Using a credit card is like taking out a loan. If you do not pay your card balance in full each month, you will have to pay interest on that loan.

Choose Wisely
The best way to maximize the benefits of credit cards is to understand your financial lifestyle – your money needs and wants. Once you determine how you use a credit card, it is important to understand all of the card's features including:

  • Annual Percentage Rates (APRs) and whether rates are fixed or variable
  • Annual, late and over-limit fees
  • Credit limit on account
  • Grace periods before interest begins accruing
  • Rewards including airline miles or cash back

Stay Alert
Some credit card issuers offer free, personalized and automatic alert messages to your phone and email to help you keep track of:

  • Available credit
  • Balances
  • Payment due dates
  • Payment histories
  • Purchase activities

Understand Your Rights
Credit cardholders are entitled to protections:

  • If you report loss or theft of your cards promptly to your card issuers, you are normally not liable for charges resulting from fraudulent use. For more information, please contact your card issuer.
  • In some cases, you have the right to dispute purchases with merchants for unsatisfactory products or services.

Follow the 20-10 Rule
This general rule of thumb helps you understand how much credit you can afford. Credit cards are loans, so you should avoid borrowing more than 20 percent of your annual net income on all of your loans (not including a mortgage). Payments on those loans should not exceed 10 percent of your monthly net income.