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Credit Card Tips

Use credit cards more effectively and responsibly

In the last few years new legislation in the CARD Act (Credit Card Accountability Responsibility and Disclosure Act), Dodd-Frank Act and new Federal Reserve regulations has created a number of changes in the credit industry; equally affecting both credit card companies and consumers. Here are several tips to consider when it comes to using your credit card.

Take care of your credit

This advice is nothing new. Pay your bills on time, pay off balances when you can, keep balances low (less than 30% of your available limit) when you can't pay them off, only apply for credit when necessary, etc.; these are all common-sense practices. But since it's become harder to get credit and interest rates have skyrocketed, minding your credit scores is more critical than ever.

If you have any revolving debt, you want the absolute lowest interest rate available. And the only way to qualify for the best rates is to have impeccable credit; 720 (740 with some lenders). If your credit isn't in the best shape, postpone applying for a card until your scores improve. If you 'need' to apply do some homework first. Don't waste taking a hit on your credit report for a card you aren't likely to get. There are several credit card finders on the Internet that can help you figure out what type of card you are eligible for based on your credit score. Whittle it down to 2 or 3 and go with the one that best suits your needs.

Carry cash or debit for small purchases

On one occasion or another you have likely seen a notice posted at a cash register saying something like, "Minimum $10 amount required on credit card transactions." You may have just gone along with it not knowing that it was in violation of card network rules for the merchant to impose such restrictions. Well, it was a violation until the recent passing of The Dodd-Frank Wall Street Reform and Consumer Protection Act which now allows retailers and other merchants to set a minimum purchase amount for credit card transactions without fear of penalty.

So, make sure you always carry at least $10 in cash, or a debit card (there are no minimum restrictions on debit cards) in case the merchant has minimum purchase requirements on credit card transactions.

Keep your card agreement summary

New cardholders have always received a copy of the credit card agreement along with their new card. Really, who reads the multi-paged, technical jargon fine print that comes with that new shiny piece of plastic? The Federal Government recognizes the complexity of credit card terms and agreements and has mandated in the CARD Act that credit card issuers make contracts more "transparent". A simplified one-page summary that highlights the key terms of the contract must accompany the full version. Keep this in your records for future references.

Watch for changes to existing accounts

Under the CARD Act, issuers must provide notice of certain changes to accounts 45 days before they take effect. For instance, issuers must give 45 days' advance notice before increasing the required minimum payment. The law doesn't require advance notice of all changes, however. Changes that don't have to be announced ahead of time include credit limit reductions and account closures. Certain changes you can opt out of, such as increases to fees that were disclosed in the account-opening table. To allow for response time to an undesired change, open mail from card issuers immediately.

Use credit cards you don't want to lose

Though the Credit CARD Act banned issuers from charging inactivity fees, nothing prevents an issuer from shutting down an unprofitable account or reducing the credit limit. Several card issuers have been known to close accounts if they go unused for too long. If you have cards that you don't regularly use, break them out every couple of months and put something small on them, like dinner or a tank of gas. Pay off the balance so you don't incur interest and tuck them away for a few weeks until it's time for them to see a little activity.

And remember, a 'closed by grantor' listing on your credit report is never a good thing and will negatively impact your score. So stay mindful of your accounts.