Credit Cards 101

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Before you apply for a credit card, be sure you compare at least three cards. You want to get the best deal you can.

Research the following information:

1. What is the annual fee? This is what you'll pay each year for the card.
2. What is the APR (Annual Percentage Rate)? This is the yearly interest you'll pay. A lower APR means you pay less interest and save money.
3. Are there any other fees?
4. How much will it cost if a payment is late?
5. What are the costs if you go over your credit limit?
6. What is the grace period (the time between spending money and getting charged the interest)? Look for a grace period that is at the very least 25 days.

If you are not able to get a standard credit card you might be eligible for a secured credit card. Many credit unions, banks, and some other companies offer secured credit cards. Using a secured credit card can help you build or improve your credit history. This type of card is one that you pay for in advance. You put money in an account and then you use the card to spend that much money. It works like a regular credit or debit card.

If your application is approved, you pay a fee to use the card for a year. You will need to make a minimum deposit in the bank of approximately $300-$500. Sometimes the amount you deposit is your credit limit. But sometimes your credit limit is less than the amount you deposit. Your credit limit means the amount you can spend on the card. When you deposit that amount back into your account that's what you can spend next month.

The secured credit card company gives information to the three credit reporting companies about the way you pay for your card which is good for building up your credit history.

A secured credit card differs from a prepaid card in these ways:

A secured credit card usually has lower fees than a prepaid card.
A secured credit card should give information to the three credit reporting companies. Most prepaid cards do not.

How should you use your credit card? Using a credit card is like getting a loan. When you use your credit card to buy something, you are borrowing money. Just be sure you can pay it back when the time comes to pay it off. You pay less for your credit if you pay everything you owe every month. You will probably not pay interest. That makes credit less expensive for you.

If you only pay a minimum payment then you will pay interest on the amount you did not pay back. That amount is called the balance. Credit is more expensive if you pay the minimum amount due.

It's important to note:
Your interest rate could go up
You might have to pay fees
Your credit will cost you money

Keep in mind that using a credit card can help you build up your credit history if you use it right. We suggest that you: use your credit card a few times a month, buy things you can pay for that month, pay the whole credit card bill every month, and do not leave a balance on your card. In due time, this strategy will help you improve your credit history.

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