With their tremendous financial benefits, credit cards have revolutionized the American way of life. Their universal application has done away with the need to carry cash or sign check books for every single purchase. But their successful application calls for certain precautions. If debt was a problem in the past, and may become one in the future, keep open the accounts with which you have a decent track record -- meaning no, or at least few, bloopers, like late payments or overages -- and a long-standing relationship. 1. Analyze your Needs Always opt for a card that will be used over the years. Avoid store cards. Majority of them have introductory offers to dazzle you, but eventually it turns out that these cards offer low credit limit at high interest as compared to ordinary cards. Experts say that it is beneficial to have two cards. One can handle the day to day purchases and other for big ticket purchases. This will help you keep track of your expenses. 2. Awareness about Card Company’s Policies Read the terms and condition while applying for a card. This will give you the idea about the customer policies with regard to late payments etc. Do inquire as to when the interest rate is replaced by default rate and ensure that the default rate is universal. 3. Pay on Time Pay the entire amount due, on time. This aspect is not much publicized by the credit companies that make money on the interest you pay. If you pay late, the credit score falls down. Credit score represents your credit worthiness. To improve the score, keep your balance below 30 percent of your credit limit. Ensure this by avoiding the items that you cannot afford (emergency being an exception). Do inquire as to when the interest rate is replaced by default rate and ensure that the default rate is universal. 4. Track your Spendings Maintain a check register, or log into your account frequently, at the issuer's Web site. Check your balance by using software like Microsoft Money or Quicken. These personal finance software download all transactions automatically. Ensure that all, on - time payments are reported. This improves your credit card score. 5. Avoid Many Cards Though having many cards with no balances help improve your credit score, it could prove counter-productive. There may be instances where you are tempted to use them unnecessarily or at times they can become unmanageable. In such a scenario, it is always beneficial to close accounts, otherwise they will go out of hand. If debt was a problem in the past, and may become one in the future, keep open the accounts with which you have a decent track record -- meaning no, or at least few, bloopers, like late payments or overages -- and a long-standing relationship. If the low-interest offers dry up, your room for negotiating a better deal is best with a lender that has fond long-term memories of your time together.
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