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Credit is a tricky topic. They may seem like the magic solution to all your money woes: simply swipe the card and you get free money! The problem is that money eventually comes due and you have to pay up. This has plunged many people into tragic credit card debt. The way to avoid credit card trauma of this kind is to know about credit cards and choosing them, affect on credit scores along with sensible usage, interest rates, etc.

Choosing a credit card is the most important step in credit card health. There are many things to consider.

The first is the fees that the company charges. They can be hidden, so read the fine print. These terms may be hidden in ways such as “membership fee” or “activation fee” and could be taken out monthly, as well as affect your current available credit. Be on the alert for these fees, and try to get cards that do not have them.

Hand in hand with this is the “Annual Percentage Rate” or APR. This is the cost of your credit, and many companies charge it. If you are a big spender, your APR is higher. So, look for reasonable fees, and look for a company that does not charge these fees or a transfer fee.

Be aware of the interest rates as well. If you just pay the card off at the end of every month, you do not have to worry about this as much. But if you normally spend on big purchases and need a few months to pay off the card, be careful about the interest rates. Companies are sneak about APR and interest, and every card is different. You can have fixed interest no matter what you spend, or charged based on what you spend. The company can change the rates at any time as long as you are notified.

Credit score is also a scary thing. There are many things that can effect your credit score. The first is your debt to credit ratio. If you have a 1000 dollar credit limit, and you owe 800 dollars, you are going to have a lower score unless you pay it off quickly. On time payments effect your credit score. Pay as much off every month as you can, and always make sure to pay the minimum payment. Length of credit is another factor. Companies like you to have at least 7 years of good credit. Credit inquiries are also factors, as every time you apply for a new card, a loan or even a mortgage are recorded. Too many inquiries into your history and it lowers your score.

Above all, do not treat your card like free money. Do not purchase anything you cannot afford. Keep a log of what you spend, be sure to look carefully over your credit card statements, and be sure that you have plenty of money to pay the balance.

Learn as much as you can about cards, choosing them, their effect on credit scores, sensible usage of the card, interest rates, etc, and your credit health and score will thank you for it!

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