How to Manage Your Credit
Create a monthly budget., Find the best credit card offers., Know when to seek a personal loan instead., Avoid payday loans., Be wary of cash advances., Pay more than the minimum.
Step-by-Step Guide
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Step 1: Create a monthly budget.
Before you even try to start developing credit, you need to have a budget in mind.
If you don't, your credit could quickly get out of hand.
So make a list of your monthly income and all your monthly expenses, and be sure that they even out.
Better yet, end each month with an income surplus. -
Step 2: Find the best credit card offers.
Do sufficient research before you sign up for a credit card.
Remember to ask for a list of terms and conditions before signing up.
In particular, look at the following:
The Annual Percentage Rate.
This is the interest rate you will pay annually on your balances.
With most credit cards, you can avoid paying interest if you pay your balance in full each month.Penalty APR.
If you’re late with payments, a credit card company will typically increase your APR.
You should find out the rate.
APR for balance transfers.
You can transfer debts from one credit card to another.
Check whether the credit card offers a promotion 0% APR.
Fees.
Credit cards assess many fees for cash advances, balance transfers, and late payments. , Often, personal loans are a better option than credit cards.
With a personal loan, you generally will pay a lower interest rate.
You also can make equal payments on a personal loan over time.With a credit card, you pay a lot upfront, which slowly decreases each month until the balance is paid off.
You should choose a personal loan over a credit card for longer-term financing that you can’t pay off immediately.
However, you should only get a “secured” loan in a few circumstances.
When you secure a loan, you pledge other property as collateral.
This means that your lender can seize the property if you default.
Car loans are typically secured by the car itself, and home mortgages are secured by the home.
These are the only two secured loans most people ever need. , Payday loans are short-term loans given without a credit check.
Unfortunately, payday loans charge sky high interest rates, often around 400% or more.
Many payday lenders also require access to your bank account so they can withdraw the money if you don’t repay on time.You should avoid payday loans at all costs.
Instead, consider the following alternatives:
Personal loans.
You can often get these loans at a reasonable interest rate.
Loans from friends or family.
You might be embarrassed to tell people you know that you need money, but the embarrassment is preferable to a payday loan.
Pay advance from your boss.
Your employer might be willing to advance you a small sum of money. , You might take money from an ATM when you need cash.
Look elsewhere instead.
Although not as bad as payday loans, cash advances charge very high interest rates which can put you deeper into debt.
For example, you accrue interest immediately with a cash advance.
By contrast, your credit card company usually gives you a grace period on purchase.
Not so with cash advances., By paying only the minimum, it could take years to pay off a credit card balance.
You should pay more than the minimum each month to reduce the amount of interest you pay.
Your credit card statement should tell you how long it will take to pay off your debt if you only pay the minimum.
It should also calculate how much of your repayment will be interest.Generally, if you pay double the minimum, you can cut your payments in half and lower the amount that goes to interest. -
Step 3: Know when to seek a personal loan instead.
-
Step 4: Avoid payday loans.
-
Step 5: Be wary of cash advances.
-
Step 6: Pay more than the minimum.
Detailed Guide
Before you even try to start developing credit, you need to have a budget in mind.
If you don't, your credit could quickly get out of hand.
So make a list of your monthly income and all your monthly expenses, and be sure that they even out.
Better yet, end each month with an income surplus.
Do sufficient research before you sign up for a credit card.
Remember to ask for a list of terms and conditions before signing up.
In particular, look at the following:
The Annual Percentage Rate.
This is the interest rate you will pay annually on your balances.
With most credit cards, you can avoid paying interest if you pay your balance in full each month.Penalty APR.
If you’re late with payments, a credit card company will typically increase your APR.
You should find out the rate.
APR for balance transfers.
You can transfer debts from one credit card to another.
Check whether the credit card offers a promotion 0% APR.
Fees.
Credit cards assess many fees for cash advances, balance transfers, and late payments. , Often, personal loans are a better option than credit cards.
With a personal loan, you generally will pay a lower interest rate.
You also can make equal payments on a personal loan over time.With a credit card, you pay a lot upfront, which slowly decreases each month until the balance is paid off.
You should choose a personal loan over a credit card for longer-term financing that you can’t pay off immediately.
However, you should only get a “secured” loan in a few circumstances.
When you secure a loan, you pledge other property as collateral.
This means that your lender can seize the property if you default.
Car loans are typically secured by the car itself, and home mortgages are secured by the home.
These are the only two secured loans most people ever need. , Payday loans are short-term loans given without a credit check.
Unfortunately, payday loans charge sky high interest rates, often around 400% or more.
Many payday lenders also require access to your bank account so they can withdraw the money if you don’t repay on time.You should avoid payday loans at all costs.
Instead, consider the following alternatives:
Personal loans.
You can often get these loans at a reasonable interest rate.
Loans from friends or family.
You might be embarrassed to tell people you know that you need money, but the embarrassment is preferable to a payday loan.
Pay advance from your boss.
Your employer might be willing to advance you a small sum of money. , You might take money from an ATM when you need cash.
Look elsewhere instead.
Although not as bad as payday loans, cash advances charge very high interest rates which can put you deeper into debt.
For example, you accrue interest immediately with a cash advance.
By contrast, your credit card company usually gives you a grace period on purchase.
Not so with cash advances., By paying only the minimum, it could take years to pay off a credit card balance.
You should pay more than the minimum each month to reduce the amount of interest you pay.
Your credit card statement should tell you how long it will take to pay off your debt if you only pay the minimum.
It should also calculate how much of your repayment will be interest.Generally, if you pay double the minimum, you can cut your payments in half and lower the amount that goes to interest.
About the Author
Lori Sullivan
Dedicated to helping readers learn new skills in crafts and beyond.
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