Buying now and paying later can add up, and it’s not just what you spend. The fees can also add up. If you carry a balance on your credit card from month to month, you’ll pay interest on that balance every month. If you ever miss a payment, your interest rate will go up, so you’ll pay even more. Shop around to compare fees and find your best deal.
If you’re getting a credit card, compare at least three different cards. Look at
- the annual fee: How much would you pay to use the card for a year?
- the annual percentage rate (APR): This is the cost of credit expressed as a yearly rate: Your credit history, current finance rates, competition, market conditions, and special offers can affect your APR. Try to negotiate the lowest APR just like you’d negotiate the price of a car. The higher the APR, the more you’ll pay. How much interest would you pay in a year on the balances you carry each month?
- fees: How much would you pay if a payment was late? What if you went over your credit limit?
- time to pay: How much time would you have to pay your bill? Your card has to give you at least 21 days to pay your bill. Some cards give you 25 days or more. Does the card offer a grace period? The grace period is how long you have to pay your credit card bill before you’re charged interest, after the end of your billing period. Your card doesn’t have to give you a grace period to help you avoid interest charges, but many do.
- other incentives: Does the card offer airline miles, cash back, or donations to charities?
Considering a store card to get a discount? Ask the same questions before you apply.
Try to pay your whole bill every month. That helps you avoid interest charges while also helping you build the best possible credit history. If you just can’t pay in full, make at least the minimum payment before the due date.
Be strategic about how many credit cards you choose to have. Using credit cards responsibly helps build your credit record. Having a lot of cards may tempt you to spend more and may be challenging to keep track of. It might also have a negative effect on your credit score.
