Plastic Surgery

With exorbitant fees and high interest rates proving to be prolific these days, credit cards have gotten a bad rap. However you can come out unscathed if you know a few simple rules of the credit game. Credit cards can be convenient and beneficial, if you pay your balances off every month.  Cotton Candy contributor and author of Moneylicious: A Financial Clue for Generation Y Ornella Grosz gives us six ways you can make credit cards work for you.

No.1 Price protection.
This feature is a little known secret offered by most credit card companies.  After you buy an item, when the price drops, usually within 30 to 60 days, you can receive a refund on that item bought with that credit card.  Let’s say you bought a blouse for $40 and three weeks later it’s on sale for fifty percent off.  You can get the difference refunded to you.  Contact your credit card company to ask about price protection.

No. 2 Keep a low balance on you credit cards.
Shoot for using no more than 25 to 30 percent of your credit limit on each card.  This formula is known as credit utilization.   For example, if you have a $5,000 credit limit then use no more than $1250 to $1500 on that credit card.  Lower credit card utilization will help to increase your score.

No. 3 Transfer debt to a zero interest rate.
Do you have a significant balance sitting on a higher interest rate?  Take the initiative to pay off your debt faster and reduce your interest rate by transferring your debt.  Important: do not close out the old credit card.   When you close your credit card you will increase your credit utilization which could lower your score in addition to the inquiry hit for applying for a new credit card.  After completing the balance transfer, be disciplined and continue to pay off your debt on the zero interest rate credit card.

No. 4 Limit your financial loss.
The Federal Trade Commission reports that there are nearly 10 million incidents of identity theft every year.  That means about 19 people fall victim to identity theft every 60 seconds.  The good news is you have zero liability for any unauthorized charges.  Furthermore, if you report the loss of your credit card before the card is used by a thief, you will not be held liable for any authorized usage.  Under federal law, the most you will owe for unauthorized use is $50 if the thief uses your card before you report it missing.

No. 5 No credit? No problem. It can be difficult to get a traditional credit card with no credit history.  If that’s the case consider a department/retail store credit card.  Be aware of the high interest rate and finance charges.  Use the card responsibly by paying off your debt every month.  You will establish credit history and positive payment history which will increase your score.

No. 6 Activate old credit cards. Many of us have a card or two tucked away in a drawer.  The good thing is you already have credit history.  You don’t have to apply for a card and you don’t have to incur any inquiry hits.  If you’re looking to improve your FICO score over the next couple of years, these cards will come in handy.  Boost your score by charging some items and paying it off.