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How To: Use Credit Cards Wisely
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Posted October 27, 2015
Understand the fine print
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Read everything that is on the application, including the fine print. All credit cards are not created equal, and what they offer differs drastically. If you are applying for your first credit card, the smartest decision is to go through your trusted financial institution.
 
Know the interest rate
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Credit card interest rates range anywhere from 8-30%. That’s quite a difference! Lower interest rates tend to come directly from banks or credit unions, with the higher interest rates in national companies and retail stores. Higher percentage cards usually offer perks such as reward points, membership benefits, or a percentage off your purchase, but may also have an annual fee.
Use it only if you're certain you can repay the debt
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A credit card is a loan that needs to be paid back. Before putting a charge on it, make sure you can afford to pay the full balance back immediately. Making purchases you can’t afford means accumulating debt and paying interest.
 
Use a debit card (or cash) if possible
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Credit cards can easily get out of hand and should only be used for building credit or in an emergency. When you first receive your card, don’t get into the habit of using it for everyday purchases and fun. Keep it in your wallet only for situations where it is truly needed.
 
Don’t make unnecessary purchases
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Those shoes you “need to have” may not be in your budget, and are probably not the best purchase to put on your card.  Having the power of a credit card should not mean more money to spend on things you don’t need.
 
Pay bills on time and in full to avoid interest
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It’s a good idea to pay more than just the minimum payment due on your credit card because interest builds quickly and can lead to high stress. For example, let’s say you charged $500 and decided to only pay the minimum amount of $15 on your bill. If the card had an 8.9% interest rate (be aware it could be much higher than that), and you continued to only pay the minimum payment every month, it would take you a little more than three years and an additional $76.49 in interest to pay off what you charged. Using the interest calculator on the Financial 4.0 app, you are able to calculate your own bills and determine what interest could cost you over time. Also, be aware that all credit cards have a late fee that can cost you anywhere from $25-$50 if you miss the bill deadline. Save stress, time, and money by staying on top of your deadlines and purchases.

 
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