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Managing Credit Cards

Managing credit card spending and repayment can often be a difficult job for students. Remembering some facts about credit cards, though, can help you beware of mismanaging your credit.

Understanding your interest rate

The credit card company assigns you an interest rate -- this is your cost for borrowing. Paying your bill in full by the payment deadline results in a cost savings for you, the borrower, because you will not be charged any interest. By deferring full payment, however, you will begin to incur interest charges based on a percentage of your overdue monthly balance (this percentage is your set interest rate). Regardless of your cost of borrowing, you will always be required to make a minimum monthly payment.

Controlling your costs

The amount you will pay in interest will be determined by two factors: the assigned value of your rate and the amount of your overdue bill. These factors suggest that 1) you should be aware of the rate value assigned to you; this helps you know what percentage of your bill you will be paying in interest costs before you spend; and 2) you should be aware of how much you are spending; the more you owe, the more you will pay in interest costs, and therefore, you should only spend what you know you can pay back, including interest.

Monitoring your spending

If you are already carrying a balance on your bill, seriously consider the amount you are able to pay back before making additional charges on your card. If you haven't been able to pay off your bill in the past, the probability that you will not be able to pay off an even larger bill in the future is indeed very large. In addition, your minimum monthly payment will usually increase with your outstanding balance. Adding charges at this point, then, increases not only the amount you are unable to pay on your outstanding balance but also the amount of your minimum monthly payment. These two factors are certain to expand the possibility that you will not be able to make your payments on time, which will severely affect your credit rating.

Securing your future

Your credit rating is important to your future. A bad credit rating could prevent you from buying a car or a home or even jeopardize your chances of getting a job or a promotion. These consequences suggest that making your credit card payments on time will be an essential component of securing your future.

Because the choices you make now can affect your future credit opportunities, you must be careful about repaying your debt. Always remember: Do not spend more than you can pay back, and try to pay your bill in full and on time.

What matters. Where it matters.

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