Credit cards can be very dangerous to many consumers if they are not used responsibly and for the right reasons. Having said this, credit cards are not all bad and can actually be extremely beneficial if you understand that you are assuming/taking on the risk of borrowing and having to repay more than you charge if you don’t settle your bill, in full, within 30 days of making your purchases. Here are some tips to help with managing your finances and building a sound credit score:

1. DO have a major credit card and use it regularly for small purchases to build your credit in advance of buying a home. Credit card activity (monthly payments, zero balance) on your credit report is one of the most influential factors in your credit rating.

2. DON’T consistently use a credit card for everyday living expenses, increasing the outstanding balance with every purchase and only paying the minimum each month when you receive your statement. Knowing that you can’t afford the purchases in full – by the payment deadline date – should be enough of a concern that you stop the practice of “living on credit”. Racking up a balance in excess of 50% of the limit on the card and then not paying anything above the minimum is exactly what credit card companies and banks (issuers) want you to do because they charge you interest. Interest is income to the card issuer and represents the excess money you will have to pay, on top of the purchase price for the goods that you bought using the credit card, to clear the balance.

3. DO travel with a credit card rather than a debit card. If you lose your debit card or have it stolen, your entire checking account (and any savings attached to your account as an overdraft alternative) may be at risk. If you lose your credit card, contact the card issuer immediately and you’re likely not out any money at all.

4. DO shred all credit card offers you receive. That barcode on the offer could be filched from your garbage by an identity thief to open up an account in your name.

5. DON’T carry a balance on your credit card. The reality is that you do not have to carry ANY balance from month to month to build your credit. If you want to make a small purchase or a regular payment on your credit, go ahead and do so, but pay it off in full every month by the due date.

6. DON’T get a secured credit card that does NOT report your activity to the major credit bureaus (Equifax, Experian, Transunion). They’ll charge you fees and probably high interest but not provide you the benefit of building your credit history.

REMEMBER:
1. DO make all payments on time. Don’t wait until the last minute to send a payment.
2. DON’T keep or apply for credit cards that charge an annual fee and excessive penalty fees.
3. To build credit, DO consider applying for credit cards from a or retail store.