Oh, credit. What may seem like the magical fix to all of the financial woes one may suffer is often just the beginning of a host of problems. A card is not free money – you can not just swipe it and be gifted with wealth. This is when the problems start: your bill arrives in the mail and the free money isn’t so free anymore. You have to frantically find a way to pay and you are stuck. This is how many start debt. This is avoidable however, if you learn about credit. Find the problems in choosing a card, what effects a credit score, how to use the card sensible, interest rates and more.

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

The number one factor is to look out for fees charged by the credit card company. Many of these are hidden fees so be sure to look carefully at the fine print. These are often called membership or activation fees that could be removed monthly or annually. They could also effect the amount of available credit you have. Watch out for these fees, and try to find cards that are not filled with them.

Along the same lines is the “Annual Percentage Rate or APR. The APR is how much your credit costs. Many companies will charge you an APR. This can be a bigger or smaller amount based on how much you spend. So examine the fees and find the lowest or APR free cards.

Also, consider the interest rates on a card. If your card usage is to just pay the balance at the end of every month, APR and interest is not as much of a concern to the spender. But if you are planning to have to pay interest ever or make a large purchase, this issue is crucial. Your APR is a sneaky topic, and changes with each card. It can start fixed and stay that way, or it can change depending on what you spend each month. The credit company can change it whenever they want as long as they let you know it is happening.

Watch out for a credit score. This can seem scary but it’s fairly simple to have a good score. Number one is the debt to credit ratio. If you have a 1000 dollar limit and a 900 balance, you have a poor ratio. This lowers your score unless you quickly settle the ratio. If you are prompt and timely in your payments, this will give you a better score as well. Always pay off as much as you can every month, and pay at least the minimum payment. The length of your ownership of the card is another factor. Seven years is a good time. Watch out for credit inquiries: if you apply for a loan or a mortgage or cards, your score can be effected. Too many inquiries lowers your score.

Your credit card is not free money. Do not treat it like free money. Only buy things that you know you can afford. Keep track of your spending, read your credit card statements, and make sure that you have more than enough money to pay off the card every month.

Educate your mind about credit, how to choose them, what effects your credit score, interest and APR as well as sensible usage. This will put you on the right path to good credit!

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