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Once you’ve checked your credit score and done all you can to raise it to a comfortable level, keeping it there should be relatively easy. Remember basic guidelines: keep a monthly budget, no matter much money you have; don’t use credit cards to make impulse purchases; avoiding manic highs and lows of spending/saving (scoring systems reward steady performance); don’t borrow to buy depreciating assets. But these guidelines don’t address some more basic questions. Like “What's a safe amount of consumer debt to carry?” And this is a good question to ask because, with all the various payments an ordinary American makes each month, it’s easy to lose track of just how much you owe. To answer the question of how much debt you can handle, use the 20/10 Rule: Never borrow more than 20 percent of your annual net income (after taxes) on credit card. And your monthly payments should never exceed 10 percent of your monthly net income. |
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Really, maintaining a good credit score is a matter of lots of small steps to keep your spending—and the bad guys out in the world—in check. But the results of these small steps can mean tens of thousands of dollars in interest and finance fees that you get to keep. It's the best example of how important it is to keep track of the little things. |
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These tips are important and universal: Sign your card—as soon as you receive it. (Obviously, this is only as effective as the clerk who’s checking it.) When you use your card at an ATM, enter your PIN in such a way that no one can easily memorize your keystrokes. Don’t leave your receipt behind at the ATM. Your PIN and account number from a discarded receipt could make you vulnerable to credit card fraud. Don’t give your credit card number over the telephone unless you initiated the call. Make certain you get your card back after you make a purchase (one way to dot his: leave your wallet open in your hand until you have the card back). Also, make sure that you personally rip up any voided or cancelled sales slips. Keep a list of your credit cards, credit-card numbers and relevant toll-free numbers in a safe place, in case your cards are stolen or lost. |
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Although the numbers are increasing, consumers are still not using their credit cards on the Internet nearly as much as electronic retailers would like. That's why many online merchants continue to offer a toll-free order number so that shoppers have the choice of calling their order in. |
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Billing errors can happen. So it's important to save your receipts and credit slips and compare them to your monthly statements. File your statements in a secure place for future reference. If you choose not to keep your statements, destroy them before throwing them away. If you do discover an error on your statement (like an unauthorized charge or purchase), write to your card issuer immediately. Be sure to state that it is a billing error, which is handled differently than a dispute with a merchant. Remember: You must notify your credit card issuer in writing to be legally protected. Also, it is far more difficult to challenge a charge once it has been paid. |
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If a credit card is used before you report it lost or stolen, your maximum liability for unauthorized charges is $50 per card. If you report your card stolen before someone uses it, your liability may be zero. But, if a member of your immediate family (spouse, child, parent) borrows your credit card to make a purchase—with or without your knowledge—you may be liable for that purchase. Notify your card issuer if you and your spouse become separated or divorced. Otherwise, you could be liable for charges on your joint account. |
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Your credit card provides you with valuable purchasing power and convenience. To purchase a number of goods and services, all you need to do is present your card and sign a receipt. Unfortunately, this power and convenience also make your card that much more appealing to criminals looking to take advantage of your credit. |
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Perhaps the most interesting conclusion the court made about Broder’s charges involved a literal discussion of the term small print. Some of MBNA’s contract language about how it would allocate payments was—literally—in small print. And New York had a law about jamming weasel words in tiny type. |
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Under the method of payment allocation used by MBNA, Broder's cash advances subject to the 6.9 percent rate were reduced by the amount of his monthly payments while his purchase balances remained wholly unpaid and continued to accrue finance charges at the higher rate. |
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Moving a card balance from a higher interest rate card to a lower interest rate one can make sense and save you money. But move carefully on these deals-and, in any case, don't do them more than once or twice a year. |
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