Put credit cards to work for you (part #1)

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Put credit cards to work for you (part #1)
2 years ago
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Does it sound strange to think of credit cards as your friends? It seems that everywhere we turn we hear financial advisors tell us to whittle away at our existing credit card debt.
If you're like many cash-strapped consumers who have overextended their credit cards, you've heard, time and again, that the way to financial solvency is to pay your cards off one by one. Experts also agree that you should shred your over-used cards to avoid re-using them.

Well, yes and no. While this is certainly laudable advice for those with a history of overextending their credit, it is also true that securing credit cards actually helps you establish a good credit rating. Along those lines, don?셳 be so quick to close your accounts when you do pay off your balances. The fact that you have a zero balance or a PF (paid in full) on your Big Three Credit Reports (Trans Union, Equifax, and Experian) looks better than having no recent credit history.

Be Prudent When Whipping Out the Plastic!
Of course, there is no denying that personal finances which spiral out of control are a problem in the life of many American consumers.

The slippery slope to high credit card debt is not always avoidable. The most principled purchaser can fall behind due to an occasional emergency. This results in exorbitant overages such as late fees which make it hard to catch up. But catch up you must, to maintain a good credit score.

That's why it is recommended that credit cards should be only used as a last resort, or when absolutely absolutely necessary. Take all the change in your piggy bank to the Coin Star counter in your local supermarket if you have to, but train yourself not to pay for small-ticket items with a credit card unless you absolutely have to.

Of course, it is also important that balances be paid before the next billing cycle. Don?셳 carry balances for months and months. Unpaid balances have an invisible black mark next to them and will be viewed as such when you?셱e filling out a credit application.


Applying for Your First Card
Unfortunately, there are still many consumers who have never owned a credit card. As good credit is usually established through credit card usage, it is important to try to obtain one. You can?셳 overlook the fact that your history of paying back revolving credit accounts (loans with interest fees that fluctuate) is deemed to be an indicator of your credit worthiness.
The main credit cards available in the United States today are Visa, MasterCard, American Express and Discover. Try to obtain a card with an APR (Annual Percentage Rate) of less than 9.9%, if possible.

It?셲 recommended that, for your first card, you forget filling out those generic credit card applications that ?쐇nvite??you, as a ?쐏re-selected??candidate. To open up your first account, walk into your bank branch and ask to speak with someone about opening up a bank credit card. Show the bank representative your monthly bank statements. Stress the fact that your account is never in the negative and that you always balance your checkbook.

You'll be given a one-page application to fill out. You can fill it out at home and either drop it in the mail or bring it back. A few days later, you'll either get an approval or you will be sent a counter offer for a secured credit card.


Continue reading - Put credit cards to work for you (part #2)
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