The Key to Credit Card Spending

You might have not listened to the resolutions we proposed just last week about how you shouldn’t rely on your credit card that much. Let’s face it: financial responsibility usually starts with a credit card and you won’t be able to cut yours up just yet. So let’s look at credit cards and see what’s important to know about borrowing.

All credit cards come with a credit limit. Think about that as a pre-approved loan. You can’t spend more than that at any given time, at least until you pay your bills. To get smarter with your credit, you’ll need to follow some guidelines.

Get cozy with your APR. Your APR stands for Annual Percentage Rate, and it’s an important number to know. Your APR tells you how much interest you’ll be paying on the loan over a year. So for example, if you have a 5% APR on a $1000 loan, you’re going to end up paying 0.05*1000=$50. The APR only kicks in if you don’t pay your bills on time, so be timely. This is how credit card companies get you and you can avoid it by paying off your balance. However, in the event that your balance is carried over from bill to bill, try to look for the credit card with the lowest APR.

Avoid the finance charges. The best case scenario is to spend little and pay off everything. Otherwise, your balance will carry over (as previously mentioned) from month to month. You’ll also likely be responsible for other charges, such as transaction fees, service fees, or premiums that are part of the type of card you’ve opted to carry.

Read the fine print. Every credit card comes with some long list of Terms of Service that describes some fees and details them out. If you get charged these amounts, don’t be surprised — when you signed up for your card, after all, you opted in. But if these fees are excessive, you might want to sacrifice a high APR for a no-fee (or low-fee) credit card. It’s all a matter of your financial priorities and what you’re looking for when you spend.

The bottom line when you have a credit card is that you are your best judge, so spend wisely.