How to manage your credit cards

Credit cards can be helpful in emergencies or if you are able to pay off the balance each month, but be wary! Credit cards can also get you into trouble.

5 Tips to rescue your credit from debt or identity theft

1. Get what you need.

Get your free credit report. The Fair and Accurate Credit Transactions Act (FACTA) is gradually rolling out the right to each consumer for one free copy of his or her credit report from each of the three credit bureaus per year.

2. Understand the bottom line.

If your credit score is really bad, because you were the victim of identity theft or you are deep in debt, you may be not be able to borrow at all. A bad FICO can also hurt you as you apply for a job or a professional license. Therefore, it's imperative that you improve a bad score, no matter your circumstance.

3. Clear your identity.

If your accounts have been used fraudulently, have your bank issue new cards and numbers. Report your identity theft to your local police or sheriff's department, making sure your police report lists all the fraudulent accounts. Of course, get a copy of the report. You should also get the phone number of your investigator and give it to the creditors and others involved in your case.

4. Understand how deep you're in.

In order to get out of credit card debt, you need to decide what avenue to take. According to Brobeck, a good rule of thumb is, "If you can't develop a plan to pay off your credit card debt in a year and at the same time meet your other debt obligations, you probably need help."

5. Regular check-ups.

Your credit report keeps track of your financial safety and where you stand financially. Even though you only get one free report a year, checking your credit once annually is not enough.

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How to Manage Your Credit Card Debt

If you can, you should consolidate your credit card debt. This means moving the balance from your high interest credit cards onto a single card with a lower interest rate. For instance, if you have about $200 on each of your credit cards that have interest rates between 11% and 22% and you move those balances onto your third card which carries a 5% interest rate, the money you are saving on your interest payments to the other credit cards will allow you to whittle down the principle on all of your credit card debt. Of course, in order to make this really work, you need to cut up your old high interest credit cards. Don't fool yourself into keeping them for an emergency - get rid of the temptation so you won't dig yourself another hole.

Credit Card Tips

Fees

Watch out for carrying balances. Some cards charge 20% or more in interest. (Interest is usually called "finance charges" on your statements.)
Fixed rates aren't always fixed! A credit card company can change the rate by informing you 15 days before changing the rate.
Look at your statement carefully and call the company right away if you have any questions.
There is usually a large finance charge for cash advances and interest begins accruing as soon as you take the money out, not after the next statement closing.
Be aware of annual fees. Many times you are charged $50 or more just to have the card.
Watch out for introductory offers! When you receive a credit card offer in the mail with a low rate, it may expire in three or six months. Note when and by how much the rate increases after the "introductory offer" expires. You may not remember when it expires, but the card company will.
Think about your purchases. If you are not able to afford the purchase now, chances are you won't be able to afford it in a month when the credit card bill comes in!

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