Credit Cards


If I have bad credit or no credit, what type of credit card should I get?

A secured credit card might be a good way for someone to build credit and they can be acquired from your bank or credit union.

The secured card is a credit card where the limit is secured by a deposit in the bank. For example, a secured card with a $100 limit usually requires $100 in collateral. You usually will receive your full deposit back when you close the card. With a secured credit card, you still pay off the balance on the card monthly and that builds credit.

You should shop around and pay attention to the terms and try to find one with no fees. This is a good first step to rebuilding bad credit history. And once you have a established a payment history you will probably be able to upgrade to an unsecured credit card and other lines of credit.



Should I pay off my credit card before the billing cycle ends?

Your statement balance should be paid in full before the due date. No balance will be reported to the credit agencies if balance is paid before your statement is generated. However, if balance is paid in full after the statement is generated, the balance will be reported to credit agencies at no interest charge if made within grace period. Typically, you want to report a small balance to get the best credit score. You should still pay off the card completely after you receive the statement to avoid paying any interest or fees.

Sometimes it's beneficial to pay down your credit card debt throughout the month. If you have are carrying credit card debt and are unable to pay the full balance, you should still make payments towards it as soon and often as you have money available to do so. This will gradually reduce your total balance and lower your interest payment amounts. Additionally, you may be able to clear credit space or lower your utilization of your credit amount before the date on which your statement is generated. This can boost the number reported to credit agencies when you know you will be applying for a loan within the following two months.


How does opening or applying for a new credit card affect my score?

Credit scores are impacted by a variety of factors, including how many inquiries into your credit occur within a period of time, as well as how many lines of credit you open. With each application for a credit line, your score is temporarily impacted. A single check for a line of credit will not impact your score too greatly, but applying for several lines of credit will add up and can be detrimental. When shopping for a line of credit to support a large purchase, such as a mortgage, multiple inquiries are grouped together so they are not detrimental. Therefore, you should feel free to explore your options before settling on a line of credit for a new house or car. Be careful, however, of opening too many lines of credit in a short time frame as this can pull your credit score down.


What is a credit score? How does it affect me?

Today, the most common way to calculate a credit score is your FICO score. Your credit score is a combination of multiple different factors combined to create a number that indicates how risky it would be to provide you with a loan. The higher the credit score, the better the interest rate you will probably receive. That being said, the lower the interest rate, the cheaper the loan will end up being in the long run. Credit scores are used for determining interest rates when purchasing a home, car, or any other type of personal loan. They can also be used when applying to live in a rental property or apply for a job.


How do credit cards work?

Over time credit cards have become the most widely accepted form of consumer spending in the us. A cardholder and their selected authorized users are permitted a spending a selected amount, which is generally based upon their credit score and history. This unsecured line of credit can turn out to be a costly mistake if the account holder chooses to pay only the minimum balance each month. By doing so the balance remains at a higher level than necessary allowing the crediting company to apply and interest charge to the remaining balance. This doesn't initially play a role on the card holder’s credit score, but if the account balance in question exceeds the payments over time the purchases directly result in higher than expected costs. These costs are the result of high interest rates and the longer the balance remains the more catastrophic the effects are on the cardholder.


What is a balance transfer?

Credit card balance transfers are when a balance owed is transferred from one credit card to another. Many cards offer 0% rates for transferred balances, typically for one year. This can make them a useful tool to get out of debt, however, there are several factors to consider before transferring a balance. If you’re applying for a new card, this costs you a hard inquiry on your credit report, which affects your credit score. The transfer fee, typically 3-5% of the balance, may be more than the interest you would pay otherwise. Missing a payment, having a payment returned for insufficient funds, or exceeding your credit limit will typically invalidate the 0% rate, and interest may be applied retroactively. Beware of these potential issues with balance transfers, and carefully check the terms and conditions of any 0% balance card you are considering, to be sure you understand the limitations of the offer.