Credit Card: Dos and Don'ts, Pros and Cons

​Are you making prudent use of your credit cards?

What is a Credit Card?

Any card or other credit tool designed to be used to get goods, money, or services on credit. Issued by a company or bank that offers the usage of its credit card, often known as a credit card issuer.

What are the Pros and Cons of Credit Card?

Pros:

• Convenient, cashless
• Speedy transactions
• Rewards, rebates
• Deferred payments, installments at zero interest rates
• Balance transfers at lower interest rates

Cons

• Tendency to overspend
• High interest rates
• Finance charges, compounded
• High cash advance fees
• Other fees (annual membership, fees for late payments, over limit fees)

What are the Dos and Don'ts of Credit Card?

Dos:

• The terms and conditions of your credit card agreement should be carefully read and understood.
• Purchases should not exceed your means of payment or budget.
• Analyze the credit card statement. Look for unlawful, suspicious transactions.
• Pay the entire balance due by the due date or earlier.
• Keep your credit card company's contact information current.
• Contact your credit card company right away if you have any concerns.

Don'ts

• Spend no money that you don't have.
• Keep your balances from getting too high.
• Don't buy something solely to get discounts or perks.
• Cash advances via credit cards are not permitted.
• Don't disregard valid calls and alerts from the companies that issue your credit cards.
• If you're facing problems, don't hide from your creditors.

Remember, credit card issuers must:

• Give cardholders clear, understandable information in a billing statement, statement of accounts, or other written or electronic document.
• Provide written or electronic notice to cardholders of computations and charge adjustments at least 90 days in advance.
• Give cardholders the option to cancel their credit card accounts if any changes to the terms, calculations, or fees are undesirable.

Remember, Credit card holders must:

• Be transactors

Is a consumer who pays their credit card balance in full and on time every month. Transactors do not carry a balance from month to month, so they are not required to pay finance charges nor late fees.

• Not be revolvers

A revolver is a credit card issuer term for customers who carry balances from month to month. Revolvers only pay the minimum amount due, which often only go toward paying interest and in the process inflates the outstanding balance and prolonging payment period.

• Use credit cards responsibly

Billing statements should contain:

• Statement date; Cut-off Date; Due Date
• Total Amount Due; Minimum Amount Due
• Effective Interest Rates
• Method of Computing Interest
• Finance Charges
• Late Payment Fees; Other Fees
• Conversion rates for foreign currency transactions
• Transaction History

Reminder

Paying less than the total amount due will increase the amount of interest you pay and the time it takes to repay your balance.