NDSU Extension Service - Ramsey County

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Credit Strategies

Credit Strategies

To say that Americans love credit would be an understatement.  Many Americans live and die by the outstanding balance on the little pieces of plastic with their name embossed on them.  By definition, credit is the use of borrowed money for a price, called interest. The use of credit creates debt, which is the outstanding balance owed to lenders. Debt repayment is a major expense for many families. Below are some tips for smart use of credit::

- Borrow as little as possible by making the largest down payment you can afford. When car payments end, continue making the previous monthly payment to yourself to build up a down payment for your next car.

- Shop for credit, just like other purchases. Compare at least three credit issuers for the lowest annual percentage rate (APR) and fees.

-  Apply for a secured credit card if you are having difficulty establishing credit. A secured card is backed by money deposited with the lender, often $500 to $1,000. The account serves as security for the card. If you don’t repay what you owe, the money in your account can be taken. A list of secured card issuers can be

- Read credit card disclosure charts and footnotes carefully. By law, all credit cards must include a so-called “Schumer Box” (named for the sponsor of the legislation) that includes the annual percentage rate (APR), various fees, the balance calculation method, and the minimum finance charge.

- Avoid using credit card cash advances. The interest rate is high because most creditors charge interest from the date money is borrowed (i.e., there is no grace period), along with transaction fees (e.g., $2.50 per advance). In addition, many creditors charge a higher APR on cash advances than they do for regular purchases.

- Always pay more than the minimum balance due – or interest paid can soon add up to a sizable amount.

- Pay credit card bills promptly to reduce the average daily balance on which interest is charged. The sooner you make a payment, the lower the average daily balance will be.

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