If you’re trying to build/rebuild credit, life without at least one card is difficult. Try a low limit credit card and use it sensibly to prove your creditworthiness. Credit can get you into trouble and can get you out of it — the two edges of a single sword.
Read the Fine Print – Know Your Card!
Variable rates – A 0% interest rate needs thought. That rate isn’t forever, and transferring balances usually has a cost. Paying transfer fees cancels your savings before you start. Creditcards.com is a great place to compare options.
Hidden Fees – A card for those rebuilding or receiving rewards usually has an annual fee. Maybe the rewards are worth it, but keep your eye out for no-fee options. If you’re rebuilding, try to move to a no-fee card ASAP. A good site for monitoring credit is Credit Karma . Get your free credit report to monitor your FICO score , but Credit Karma helps with knowing if your credit habits are improving.
Damned If You Do – Credit card companies reward good behavior by increasing your limit. Great for your credit score. But keep your overall spend at 30 – 45% of your total line to avoid negatively impacting your credit. To prevent a reduction in your line, consider using more of it occasionally, but avoid transfer fees, and pay the balance back over 2 or 3 months. You’ll maintain your limits, and your credit score!
Good Credit Makes Life Easier
Emergency Funds – Accessible emergency funds when you need them, via your card. If you suddenly need a large sum to pay for an unexpected expense, your credit card can come to the rescue. But once you’ve paid it back, consider setting up an emergency fund to avoid getting stuck next time.
Proof of Your Ability to Handle Credit – To build or rebuild your credit you need to demonstrate your can handle it. You could prove yourself with an auto loan, mortgage/rent or student loan, but 2 out of 3 require good credit t begin with. It’s a big circle. Start out with a small card, keep your total balance at the limit indicated, and make on-time payments. In no time you’ll find your credit score increasing. Then remember – don’t let your guard down.
Easier and Safer Travel – International travel is cheaper because you’ll benefit from the lowest exchange rate, and you’ll usually get additional travel assistance and insurance through your credit card. You’ll be safer as well, without the worry of losing traveler’s checks, or identity and access to your personal accounts via your debit card.
Keep up the sensible use, and timely payments, and you’ll be on your way to establishing great credit and a life without the stress and strain of bills that are out of your control.