Credit Cards
Opening Them & Knowing How to Manage Them
Hello! Coloramo FCU is excited to be starting a new blog on our new website, where hopefully members will gain some helpful advice and financial tips. As always, be sure to give us a call or stop by a branch if you have any questions or would like further details. For our first blog post, we will be going over the stigma of credit cards and how to manage them responsibly!
Credit card debt is a harsh reality for Americans. The average American household owes an average of around $6,194 in credit card debt. Ultimately, credit cards can make or break your credit, but knowing how to manage them can actually benefit your credit score. We have multiple employees here at Coloramo who are extremely knowledgeable when it comes to advice on how to properly manage your credit cards.
So where do we start?
I’m sure by now you have been inundated with requests from credit card companies asking you to get signed up. If you ever visit a college campus during orientation, you will see multiple credit card vendors waiting to snag you. This is all fine and dandy IF you know what you’re looking for before you sign up.
Here are the top things you want to look out for when signing up for a credit card:
1.Annual Percentage Rate (APR) - This is the cost of borrowing money, if you don’t pay your whole balance off each month. The lower the better.
2.Minimum Repayment - Typically, this is 3% of the balance owed or $25 whichever is higher. The smaller the payment, the longer it will take you to pay off your balance.
3.Annual Fees and Charges - Some cards charge a fee annually; this fee is added to the balance of the card where interest will be charged on it unless your balance is paid off in full. Check in the credit agreement to see what other fees are added to the balance of your card.
4.Introductory Interest – Generally, this is a special promotional rate that is lower when you first sign up for the card. It could also mean your initial purchase will not be charged interest for a stated period of time. Sometimes interest is accruing and you will be charged this accrued interest if you do not pay your balance in full by the end of the introductory period. Read your credit card disclosure agreement.
5.Loyalty points, rewards, or cash back -What does this card offer that could benefit you?
At Coloramo you can find some of the best APR’s that can benefit you in your card search. Our percentage rates are 10-15 % lower than that of most larger credit card companies.
To begin the application, process most companies will pull your credit and inquire about your employment history. Proof of your income will mostly likely be required.
What do you do once you get the card?
The best rule of thumb is to just pay the entire balance off every month before the due date. If you do keep a balance on your credit card its always smart to keep the balance below 50% of your available limit. When your card company reports your activity each month, a good credit history is created when you make your payments on time and you don’t have it maxed out. A good credit history helps you get better rates for future loans you may apply for.
If your card offers rewards like travel points or cash back, it might benefit you more to use your credit card for purchases as opposed to using your debit card, or cash. Keep in mind that you must be able to pay for the purchases you make in order for this type of use to benefit you. These rewards can stack up quickly and help you with that next vacation or when a rainy day comes around.
Budgeting your expenses will help you keep track of your credit usage as well as help you become more financially aware.
What can you do if you don’t qualify for a credit card?
There are a couple options for those who may be struggling with poor credit history or no credit history.
First, you can apply for a secured credit card. This card is secured by your own money, but it is reported the exact same way an unsecured card would be reported. Here at Coloramo we can help you get started with a secured credit card. After 12 months of responsible use you could apply for and possibly qualify for an unsecured credit card with a higher limit.
The second option would be asking a family member who is excellent at maintaining their cards if they would be willing to add you on as an authorized signer to their cards or co-signing on a card for you. This is a quick way to help you develop some credit history if you have the resources to help you.
The Retail Store Trap
Retail stores typically have credit cards that earn rewards or extra discounts for use in their store. These are great if you’re a frequent shopper at that store. Never go on a shopping spree if you don’t have the funds to cover the payoff.
In Conclusion
Credit cards are an amazing way to develop credit history. Coloramo is here to help with any and all of your credit card questions. We offer three different credit cards: Visa Secured card, Visa Classic card, and a Visa Platinum. Please call one of our lenders today to inquire about which credit card is right for you.
Please contact us if you have any questions, or you are interested in learning more about what we offer here at Coloramo.