Credit Card Basics
Credit cards can be a great resource if used properly. Having a credit card that you use to pay for expenses, then pay back monthly, can help you build positive credit on your credit report. However, misusing a credit card, or having too many, can damage your credit. A few things to know:
Make sure to check what the interest rate is on any credit card you apply for. Some have great introductory rates (like 6%, for example) but may jump up to 18% or 21% after the introductory period expires (typically 6 months). Legislation is in the works to prevent the higher rate from applying retroactively, to the balance you are already carrying. For the time being, however, pay attention to the regular interest rate that will apply at the end of that intro period.
You CAN have too much of a good thing. Having too many credit cards makes you look like a bad risk to lenders. This is true even if you have good history with the cards (i.e., you haven't carried a balance from month to month, you've always paid on time, etc). Having too much credit, or high credit limits on your cards, means to the potential lender that at any time you may end up owing that much money to other creditors. That means to them that they may lose money on you when that happens.
Every time you apply for a credit card, your credit score takes a hit. This is true even if you have only positive credit history. This is why it's not a good idea to apply for every store charge card that is offered you. (Have you ever heard this: "Would you like to apply for a [Target, Walmart, Maurice's, insert any store name here] card today and save 10%?" Don't do it. At least not every time).
If your credit card is lost or stolen, you may still be liable for the charges made to it. Always read the information that came with your card, because every company is different. If you report the loss of your card promptly prior to any charges being made by the thief, the creditor cannot require you to pay for charges made after that time. However, even if charges are made before you report the card lost, federal law states that you are only responsible for $50 worth of the unauthorized charges.
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