Photo Credit: The Consumerist

My weekend was eventful: we had a great time celebrating our friends’ 3 year anniversary on Friday, Saturday we joined in on another friend’s baby shower (her first child!), and Sunday we went over to another friend’s house for an intense game night. I hope everyone had a great time this weekend.

Anyways, my brother asked for some advice and help with his budgeting. He’d like to set it up where he deposits his check (no direct deposit at his job) and the account automatically pays his bills. He’s your typical 19 years old, he wants things easy. I don’t blame him. Having online bill pay is a time saver and it reduced a lot of fees for payments. He gave me his credit card bill for the month and I saw that he needs some help to get his finances in order.

Now credit cards are a part of our American culture. I carry some cash in my wallet, but use my debit card (use ‘credit’ feature to avoid transactions fees) for most of my purchases. My brother had a great introductory offer with this credit card, but now the interest rate jump to 26.74%. He’s now committed to paying this off as soon as possible. He didn’t realize it could jump so quickly.

Thinking about how many people are in the same boat, I thought I’d give a few pointers on keeping credit card debt at bay.

Read the box that comes with credit offers and updates.

The complete disclosure about fees is long and verbose. Some lawyers can’t even completely understand it. My advice is to check the box that gives the basic information like:

  • Introductory Rate
  • ‘Regular Rate’
  • Annual Fees (if any)
  • Over the limit fee
  • Late Fees

Companies are required by law to have that. If there is an annual fee for your card, I’d get another card or negotiate that off. Why should you be charged a fee to be a cardholder? Most student credit cards don’t have rewards or low interest rates, so I don’t see the benefit of having an annual fee on a card. Check your bills to see if they changed any of the rates or fees, since they can do this at any time.

Calculate the Real Interest Rate (on a $1000 balance, approx. $200-$280/year).

Many credit cards for students today fall within the 20%-28% interest rate range. Many students don’t check after their introductory rate ends. If you pay off your balance every month, this isn’t a big issue. If you carry a balance, try getting a lower rate. Bankrate.com is a good place to start, but remember to see if they are transfer fees and introductory rate’s rules (how long and what could end it prematurely).

Avoid Fees (Save approximately $936/year).

Credit cards are notorious for charging their customers $39 for later charges and $39 for going over the limit. That can be $78/month added to the balance not including the interest. Do yourself the favor and pay on time and keep it under the limit. Another way credit card companies make their money is by charging you $15 to make a payment over the phone. I can’t think of another provider that charges you for paying them over the phone. Try to mail/send your payments a week early, but if you have to pay $15 to avoid $39 or higher, then suck it up and pay the fee. Here’s the real sucker punch, if you are late on any card for another company, some credit card companies charge you on their card even if you paid on time!

Using a credit card responsibly can help your credit history, but having bad habits can quickly destroy it. Remember it’s easier to lower your credit score than raise it. Do yourself a huge favor and be reasonable with your credit card. If you don’t have the money, then don’t spend should be a general rule of thumb. It sounds pretty basic, but if people followed this advice then credit card companies wouldn’t be as rich as they are now and people would now be in as much debt as they are in now.

How do you handle credit cards?Pay in full each other or carry a balance?

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