Credit cards are a great tool when it comes to building up a good credit history. However, according to a recent report, credit card debt in America reached nearly $800 billion in 2005. How can you obtain the benefits while avoiding the pitfalls? Here are some dos and don'ts:
Monitor your balances: Credit card usage and management makes up 30% of your credit score. Keep each account balance below 50% of the available credit limit at all times to maintain your score, and below 30% to improve your score.
Read everything: Credit card companies can change the terms of your account at any time with only a simple written notification. Carefully review monthly statements along with any correspondence received throughout the life of the account.
Evaluate special rewards programs: Generally, "rewards" cards charge higher rates as well as annual fees. Unless you consistently pay off your balance in full, the programs aren't usually worth it.
Watch for universal penalty fees: If you fall behind on one credit card payment, other companies can charge you their highest penalty rates as well, even if you're in good standing with them.
Avoid special offers with introductory rates, delayed payments, or balance transfers combined with similar offers: These programs are tempting, but you will pay for it in the long run once temporary rates change and interest comes due.
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