Use credit cards wisely

A credit card allows you to charge purchases throughout the month, which are paid for by the credit card company. At the end of the month, the credit card company bills you for all the purchases you made with your card during the month. For this service, the credit card company may charge you a yearly fee. Also, if you do not pay the whole balance of your bill every month (all that you owe), the company will charge you interest on the amount you still owe. The interest can range from 7 percent to more than 18 percent.

Using credit is taking out a loan. You are making a promise to pay the money back. A credit card can be useful to make large purchases and pay them off over time. You may have to use a credit card to buy items over the phone or the Internet (such as airline tickets, for example). However, using credit can also be dangerous. If you don't pay your credit card bill on time, you can damage your credit score (a measurement of your ability to pay off debts regularly and on time). If you charge purchases without paying attention, you can quickly build up a large bill and fall into uncontrolled debt (a situation in which you owe more money than you will be able to pay off). The credit card company charges you interest on any part of the bill that you don't pay off each month.

Using a credit card is a convenient way to pay for things, but you must be careful to use it wisely. Here are some suggestions:

• Have only one major credit card. To stop other offers from coming to you in the mail, contact Opt Out by calling 888-5OPT-OUT (888-567-8688).
• Get rid of store credit cards, which often charge the highest interest rates.
• Shop around for a card that has no annual fee and a lower interest rate.
• Make sure you make your payment on time. If you are late by even one day, you'll probably be charged a hefty late fee, and your interest rate may be raised, too.
• To avoid interest rate charges, pay off the entire balance each month.