Credit Cards What You Need To KNOW

Credit cards Any card that may be used repeatedly to borrow money or buy products and services on credit. Issued by banks, savings and loans, retail stores, and other businesses.

Wise credit Not managing your credit wisely can lead to: Increased annual percentage rates (APRs) Unnecessary fees A decline in your credit Denials of future credit

What are credit cards good for? Emergencies Big ticket items Establishing credit Safer than cash More purchasing power Protection from fraud on the Internet

Types of Cards

Credit cards Revolving Credit Credit line can be used up to the credit limit Pay charges in full each month, pay just the minimum, or make a partial payment greater than the minimum due Available credit goes up and down as purchases and payments are made

Charge cards Pay all charges in full every month by the due date Cannot carry a balance No balance = no interest Some charge cards allow a balance carry-over for specific purchases, such as travel charges

Secured credit cards Guaranteed by money deposited in an account Credit limit usually equals the amount of the deposit Can be used by people with credit problems to reestablish good credit

Sub-prime credit cards Marketed to people who have poor credit Typically have very low lines of credit, large upfront fees and high interest rates

Prepaid cards Also called stored value cards These are used by retailers as gift cards travelers as a safe way to get funds on the road parents who want to give their kids the convenience of a credit card without the risk

Compare basic terms Look for a box with: This box is: interest rates grace period annual fee This box is: required by law often headed with the words “Rates and Fees” or “summary of terms”

Default or penalty rates Higher interest rates charged for late payments or decline in credit Default factors Late payment Bounced check You default on another account you have with the same creditor Higher rate will apply to new transactions only, unless you are more than 60 days late

Minimum monthly payment The lowest amount you are required to pay each month Paying just the minimum amount does very little to reduce the amount owed Paying more than the minimum helps reduce the amount of interest owed on the card Excess payment must be applied to higher-rate balances first

Payment due date The last day that payment can be accepted without penalty, generally 25-30 days after the close of the billing cycle Due dates must fall on the same day every month If payment is not received by 5:00 on the due date, a late fee will be charged

ID theft monitoring services Credit monitoring companies charge a yearly fee to check your credit report Alerts you if information in your report changes, such as reviews by potential creditors or new accounts You can check your credit report yourself for free

An educational partnership between Consumer Action and American Express