Maybe you do not have lots of debt issues or are spending within a comfortable range. Knowing your debt to income ratio is vitally important to keep financial goals in line with your spending.
Credit Card Tips
¢ Beware of skip-a-month payment offers. Remember, you still pay interest on your outstanding debt, and your total interest costs continue to rise.
¢ While cash advances can look attractive, keep in mind that interest usually accrues from the moment you accept the cash. If you add in transaction fees, the annual interest on cash advances can be more expensive than you think.
¢ Be prepared for credit card theft. Keep a list of your credit card numbers in a secure place. The list should include the name and phone number of each card issuer. Report lost or stolen cards immediately. If you report the loss before a thief uses the card, you cannot be held liable for any purchases made with the card. If a thief uses a card before you report it missing, the most you will owe on each card is $50.
¢ What is a grace period?
The amount of time, usually 20 to 25 days, during which you don’t have to pay interest on purchases made with a credit card, if and only if you have no outstanding balance on your card.
Credit cards usually offer consumers a grace period. But many consumers don’t realize that if you owe anything at all from a previous bill, you start paying interest from the moment you make a purchase. If you were wrong, don’t be embarrassed. Eight out of 10 consumers surveyed who knew they had a grace period didn’t know how it worked.
¢ When is the minimum the maximum?
If you pay the minimum monthly payment when you pay your credit card bill, you are paying the maximum interest. In fact, when interest is compounded, you could end up paying interest on your interest! The minimum payment might be convenient if it’s all you can afford. But, whenever possible, pay as much as you can. If you have an 18.5% interest rate card, it will take you more than 11 years to pay off a debt of $2,000 if you only pay the minimum balance due each month. During this time, you will pay interest charges of $1,934, almost doubling the cost of your purchase. This calculation is based on making a payment that is 1/36th of the outstanding balance or $20, whichever is greater.