How to Use Credit to Your Advantage

Credit can be a valuable tool if used wisely. Here are some tips on how to use credit to your advantage.

• Well, here's a simple one: Pay your balance in full. It's much easier said than done, but there's no question that you should, if you can. You don't want to pay interest on your purchases.

• Don't be fooled by a teaser rate. These flirtatious rates are temporary. Credit-card companies try to dazzle consumers into applying for a credit card with offers of 0% APR, or annual percentage rate. Savvy consumers can take advantage of these rates, but just be sure you know how long they last, and what that pretty rate will morph into after it expires.

• Know all the different APRs on your card. Most cards have at least two separate APRs, one for regular purchases and one for cash advances. Never use a credit card for cash. It's not an ATM card. If you draw out cash on your card, your credit-card company will charge you an average of 25% interest on that cash. Also, that cash will be the last thing you pay off. Credit-card companies allot your monthly payments to the balance with the lowest interest rate while that cash multiplies.

• Look for a card with an APR no higher than 15%.

• Only carry one or two major credit cards. Your credit score can be adversely affected if you have too many cards.

• Stop the flood before it starts by reducing direct-mail credit-card offers. Call 888 5-OPTOUT, and ask to have your name removed from preselected lists at the three major credit bureaus.

• Check your credit report to make sure there are no inaccuracies that could raise the APR on your credit cards. You can check by calling Equifax, Experian, or Trans Union.