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With their tremendous financial benefits, credit cards have revolutionized the American way of life. Their universal application has done away with the need to carry cash or sign check books for every single purchase. But their successful application calls for certain precautions.

1. Analyze your Needs
Always opt for a card that will be used over the years. Avoid store cards. Majority of them have introductory offers to dazzle you, but eventually it turns out that these cards offer low credit limit at high interest as compared to ordinary cards.

Experts say that it is beneficial to have two cards. One can handle the day to day purchases and other for big ticket purchases. This will help you keep track of your expenses.

2. Awareness about Card Company’s Policies
Read the terms and condition while applying for a card. This will give you the idea about the customer policies with regard to late payments etc. Do inquire as to when the interest rate is replaced by default rate and ensure that the default rate is universal.

3. Pay on Time
Pay the entire amount due, on time. This aspect is not much publicized by the credit companies that make money on the interest you pay. If you pay late, the credit score falls down. Credit score represents your credit worthiness.

To improve the score, keep your balance below 30 percent of your credit limit. Ensure this by avoiding the items that you cannot afford (emergency being an exception).

4. Track your Spendings
Maintain a check register, or log into your account frequently, at the issuer’s Web site. Check your balance by using software like Microsoft Money or Quicken. These personal finance software download all transactions automatically.

Ensure that all, on – time payments are reported. This improves your credit card score.

5. Avoid Many Cards
Though having many cards with no balances help improve your credit score, it could prove counter-productive. There may be instances where you are tempted to use them unnecessarily or at times they can become unmanageable. In such a scenario, it is always beneficial to close accounts, otherwise they will go out of hand. If debt was a problem in the past, and may become one in the future, keep open the accounts with which you have a decent track record — meaning no, or at least few, bloopers, like late payments or overages — and a long-standing relationship. If the low-interest offers dry up, your room for negotiating a better deal is best with a lender that has fond long-term memories of your time together.

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Credit card myths can cost you money and affect your credit rating. Here are the five biggest myths.

Credit card issuers generally do not disclose much information about their product. There are many myths about credit cards in the market, and believing in one can cost you dearly. The best thing to do? Know these myths and get wiser.

Here are top five credit card myths you should be aware of:

Myth No. 1: Some credit cards have no credit limit.
You must be aware of the popular tagline advertised by American Express – “No present spending limit”. However, all credit cards come with a credit limit.

This tagline is more of a marketing gimmick. It does not mean that anybody who owns an AmEx card can shop for a sports car worth $250,000. This tagline comes with an asterisk sign which further reads — “… does not mean unlimited spending. Your purchases are approved based on a variety of factors, including current spending patterns, your payment history, credit record and financial resources known to us”.

The credit limit on AmEx cards is dynamic. It means that if your credit history reveals that you make purchases of small amount on your card and one fine day you make a purchase for a large amount, your card can be declined by the issuer. Therefore, it is always wiser to make a call before making any such transaction.

Myth No. 2: A credit card company can’t change the interest rate until you get a bad credit rating.
You have been paying credit card bills on time or your usage is much below the credit limit. However, the interest rate doubles in your next credit bill and you are surprised about what went wrong. The fact is that credit card companies can change the rates at 15 days of notice.

This privilege enjoyed by the credit card companies will be ending in July 2010 though as the federal regulations will ban hike in interest rate, with certain exceptions, on the existing balances.

Myth No. 3: It is necessary for merchants to ask for your Identification card when you pay through a credit card.
You made a purchase of $3000 at a local store and the merchant charges your credit card without checking whether you are the same person who owns the card. However, the fact is that the Merchant’s agreement with the credit card companies forbids them from asking any kind of identification.

Even organizations like American Express and Discover discourages this practice. So don’t be surprised at the merchant’s behavior as your signature is enough for him.

Myth No.4: Merchants can set a minimum amount for a transaction on your credit card purchase.
All the credit card companies charge the merchant a minimum amount of 2 percent of the sale in addition to the transaction fee. So if you buy a soap for $3 and decide to pay using your credit card the merchant might not earn much in the transaction.

Therefore, most of the times you will see the merchant displaying a board –“Minimum credit card purchase $10”. The fact is that in order to save money the merchant is discouraging small sales, which is against the agreement with the credit card companies.

You have the right to charge your card even for a penny. You can inform the credit card company regarding the practice and they will certainly do something about it.

Myth No.5: You can improve your credit rating by paying more than you owe.
The total amount due in your credit account is $200 and you make a payment of $500. This practice will temporarily raise the credit limit in your account. It is, however, recommended to keep a certain amount due in your account for better credit rating. The fact is having below zero balance in your credit account will still reflect a zero balance for the rating purpose.

These are not the only credit card myths. There are a lot more. It’s a good idea to let some of your friends and family know these myths now and ask some credit card revelations from them, if they have any. Shared knowledge can get you far.

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To enjoy greater financial options, it is advisable that you have a good credit score. We gives you an idea on how to go about ensuring a superior credit score.

It is your credit score that will eventually determine your credit worthiness and make your access to loans and other kinds of financial instruments either easy or difficult.

Let’s face it. In today’s time, you cannot survive without your plastic money or your credit card. No matter how much you try to avoid this evil, you are bound to need it to carry out a few essential transactions.

When the health of your personal finances can be impacted by this instrument, why not use it wisely to generate a good score over the years?

Here is what you could do to ensure that you have a decent credit score.

1. Settle Your Credit Card Payments on Time
Your credit card ratings are largely affected by your payment history, or in other words, whether or not you have settled in full all your credit card payments well within time.

Any payment due, whether on your insurance premiums, club membership fees, purchases or even parking tickets, can have an immediate bearing on your credit score and in turn influence your probability of accessing a loan in future.

2. Use Minimum of Your Authorized Credit Limit
Your credit balance should never exceed 30 percent of the total credit limit that you are authorized on your card.

In fact minimum use of your credit limit is a good idea to have a good credit score.

You must always take only as much credit as you can comfortably repay. Another fact to remember is not to apply for too many loans all at once.

3. Maintain a Long Credit History
It is important that you keep all your credit accounts active in order to get a good credit score.

In fact, when you approach an agency for a loan, they make it a point to check your credit track record or history of your credit cards and other credits.

So, the longer your history, the better it is, because it is the only available proof that you have been paying off all your outstandings on time. It is for the same reason that even shifting balances from one credit card to another too often, can be detrimental to your credit worthiness.

But if you are finding it difficult to handle all your credit cards, and wish to close one or more accounts, what you can do is close down the one that has the most recent history.

This way you will be able to protect the credit points that you have accumulated over the years.

4. Obtain a Good Mix Of Credit Cards
For those of you who have just begun their independent life, the right thing to do is to get a diverse mix of credit cards.

You would for obvious reasons not have a long credit history, so in order to build a strong credit score, you can get yourself an assortment of diverse credit accounts including car loans, mortgages, installments, revolving credit etc.

5. Communicate Your Difficulties to Creditors
Whenever you anticipate a difficult situation such as a loss of job, divorce, bankruptcy, or fall into an unforeseen circumstance such as illness or injury, communicate about the same to your creditors.

The sooner you get in touch with them the better. Remember, your creditors will always be ready to bail you out of the situation financially.

They may help you by lowering your rate of interest, giving you some rebate on monthly payments, postponing payments until situations improve or even foregoing the payments in certain cases so that your credit score is protected.

Your lender can also suggest financial counseling to help you pay off your debt in a planned manner.

6. Protect Your Personal Information
Safeguard the security of your credit cards and your credit score by making sure that you do not divulge your personal information comprising of your social security number, bank account numbers and even credit card or debit card details to any unknown person or site.

Never reveal such personal information when demanded through e-mails and be extra cautious while shopping online.

While it is not too difficult to build a good credit score if you follow the above mentioned tips, you should also consider getting an overdraft protection and various insurance covers to avoid bankruptcy and their subsequent ill effects on your credit score.

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Stuck in debt? Want to reduce the amount of money you owe? Here is a practical guide on budgeting and making best use of your monthly income.

If you are determined to reduce your debt and are serious about this, it pays to get practical. Look at your budget and figure out exactly how you can make the best use of your monthly income.

Here are some practical ways of cutting down debt:

Shun Credit Cards
Say you’ve got four credit card debts. How do you get that down to three, to two, to one, to zero? Start by taking a look at the interest rates. Find the one that’s costing you the most per dollar and focus on getting rid of that one.

If you’re not sure how it all works, get some debt advice. It’ll set you on the right path, so you can make sure you’re targeting your efforts as effectively as possible.

The trick is to put all available money towards that debt. Just pay the minimum towards your other debts, and overpay that credit card by as much as you can afford.

Determine Amount to Pay off Debt
It’s up to you how much of your ‘spare’ cash you want to put towards this. Some people prefer to cut their spending to an absolute minimum so they can put as much as possible towards that debt.

Others prefer to ‘sacrifice’ 50 percent (or less) of their spare cash, which means that it’ll take them longer to clear that debt, but also that they’ll still have some money for spending on non-essentials (also known as luxuries).

Again, if you’re not sure about what’s ‘essential’, what isn’t, and where you could cut back on your spending so you can repay your debts faster, get some debt advice.

It’s up to you exactly how you overpay. Just ask yourself:
– how much do I want to get out of debt?
– how many sacrifices am I prepared to make?

Would I rather:
– cut back on everything for a relatively short time, or
– cut back less – but for longer?

Focus on Interest Rate
The simplest (and cheapest) way of looking at overpaying your debts is to focus on the actual cost, the interest you’re charged.

Simply overpay the debt with the highest interest rate, and once that debt is gone, start overpaying the next-highest.

However, not everyone works that way. Say the debt on one of your cards is significantly lower than on the others.

Even if it’s not the cheapest, you might still decide to focus on that one first. It might not be the cheapest way (remember the interest factor), but the psychological impact of clearing a debt altogether can really give you the kind of morale boost you need when you’re working on a demanding but worthwhile project like this.

Whichever way you do it, here’s something encouraging to keep in mind. Once you’ve gotten rid of a debt altogether, that’s one less debt to worry about. In other words, your actual required payments will go down, which means you’ll have that bit more to use to overpay your remaining debts.

And finally, if you’re really determined to reduce your debts, don’t underestimate how much the right debt advice can help you, and make sure you don’t take on more debt while you’re working on your repaying your current debts.

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Credit-card rewards are one of the many marketing strategies adopted by credit-card companies to lure customers. The Money Times tells you how to select and make the most of them.

Typically, credit-card companies try to lure their customers by linking their credit-card purchases to certain attractions or benefits. These reward programs are therefore extremely desirable even from the customers’ point of view, provided a little vigilance and prudence is used while choosing them.

In this age where most financial gurus discourage the use of credit-cards, credit-card reward programs have emerged as one of the finest examples of smart marketing, having the potential to create a win-win situation for both the credit card company and its customers.

Read on to get to know more about these credit-card reward programs and understand which one is designed to suit your needs:

Before Enrolling for a Credit-card Reward Program
Today, credit-card users have a wide array of alternative rewards to select from. But before they decide which one to sign up for, it is imperative that they evaluate different credit-cards on the basis of the rewards, rebates and other benefits associated with their usage.

As not all credit-card reward programs are the same, a potential credit-card user must compare and contrast the charges, procedures as well as accumulation and redemption of points before taking the plunge.

It is also essential that one finds beforehand as to whether the credit-card of his choice automatically enrolls him to the benefits of its reward programs or it necessitates adherence to certain laid down procedures or payments to become eligible for the advantages.

But once they are enrolled, they have a wide assortment of credit-card reward programs to choose from.

Types of Credit Card Reward Programs

Here is a list of the different credit-card reward programs available to a credit-card holder:

1. Cash Back/Rebate Cards
The ‘cash back/rebate cards’ are the most sought after reward programs for the simple reason that these enable users to get a part of the payment made by them, either in cash, check or by the way of a discount of the said amount, thus increasing their practicality.

However, selecting a credit-card that offers the best cash back may not be that easy. It requires one to evaluate each card closely to find out the hidden costs such as annual fees, balance transfer fees and grace period apart from the list of stores where it can be used.

2. Frequent Flier Reward Cards
The ‘frequent-flier reward cards’ are ideal for those who frequently travel by air. Such a card enables user to collect air miles for the distance traveled and subsequently redeem these air miles by getting free air tickets.

There are a few cards that offer hotel rewards entitling its users free stay in hotels either in conjunction to their frequent-flier card or separately.

Once again you need to check the various airlines and hotels available on the card’s list before you decide to travel. Read the fine print and pay special attention to the list of services included and excluded from travel arrangement before opting for this reward card.

3. Points Reward Cards
The ‘points reward cards’ help you earn points on each of your purchases. You are required to collect these points and redeem them later by choosing merchandises from their list, for free. Often the list of merchandise that you can select is available beforehand. So make sure that you check this list and get enrolled only if it has something worthwhile.

4. Gasoline Reward Cards
Lastly, the ‘gasoline reward cards’ entitle you to free gas once you have accumulated a certain number of points.

All said and done, one must not forget that non repayment of the amount due for your credit card purchases comes with penalties, and exorbitant interest rates. So, while deciding which credit card to choose, select the one which delivers the best mix of a reward program most suitable to your lifestyle and and has lowest penalties or interest rate.

Also, do not forget reading the terms and conditions before signing-up for one, as a reward program might be nothing more than a marketing gimmick.

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In an economy which is virtually powered by credit cards, it is impossible not to use the instrument for enhancing your purchasing power.

Though it can prove counter productive, there are ways of limiting its ill effects. For a shopping freak, credit cards might be the invention of the millennium, but this instrument needs to be handled wisely so-as-to reap its benefits for a long time to come.

Here are 7 most powerful guidelines for you to keep your credit score rating high and on the other hand to avoid the risk of accumulating debt, something you know you find difficult to repay:

Make Saving a Habit
People are often forced to use their credit cards to cater for their surprise expenses such as a major car repair or payment of hospital bills. To avoid using your credit card under such dire circumstances, make saving a habit. Better still, make provision for an emergency fund.

Buy Only What You Can Afford
The best way to avoid credit card debt is to charge your card only with expenses that you can afford to make. If you don’t have the cash to go on a Europe tour, there is no point charging your credit card with it and then keep repaying it for the rest of your life.

Consider Other Credit Options
While making large purchases like a car or a property, it will be more prudent on your part to get a personal loan rather than charging it on your credit cards, or even worst exercising your credit card advances. The rate of interest charged on a personal loan is much lower than that charged by an average credit card.

Never Give Card Payment Dates a Miss and Pay in Full
Make payments due on your credit cards in time and in full. This is the best way to avoid carrying a credit card balance and not be constantly worried about making the minimum payment. Remember, even the minimum payment option is a financial trap set by your credit card company.

Keep Credit Cards for Emergencies
To avoid getting into a huge debt, save your credit card usage for emergencies only. Make use of liquid cash and your ATM debit cards for meeting the day to day expenses. This will also guide you towards a healthier lifestyle, where you get used to living within your means. If possible, keep your credit cards at home while visiting malls.

Avoid Too Many Cards
Too many cards translate into too much debt. It leads to confusion and also reflects badly on your credit score. Have one, at the most two credit cards that you can use sparingly.

Keep it Small The whole aim of floating credit cards into a market is to get you to spend more than what you can actually afford to. So, the mantra for avoiding debt is to keep your credit limit small. If you can remember that credit cards are an instrument invented by credit card company to earn huge returns and not for you to enjoy an all- paid-up shopping excursion, you will be able to instinctively limit its usage.

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