Credit cards are a way of life for most
consumers, with Americans building up billions of dollars of debt each year.
Credit cards have their origins in the early 1900s when department stores began offering lines of credit to their best customers. The patron would make a
purchase without putting money down. The cost of that service became the
consumer's debt which needed to be paid back, sometimes in installments. Nowadays credit cards are everywhere and Americans can't get enough of them.
Consumer Reports Money Editor, Octavio Blanco, says first of all if you're going
to sign up for department store cards be careful.
If you're shopping in a
department store you might be tempted to get a new card when the cashier offers
you a 10 to 20% discount. Hey it's a great deal. A 10 to 20%
discount might look tasty but these cards tend to have very high interest
rates the average interest rate for store branded credit cards is about 25%, the average for other cards closer to 17 %, much lower.
And Octavio says beware of having an outstanding balance on a store card at
the end of the month. If you don't pay your bill in full each month the
interest can make a small credit card bill quickly balloon into a large one
but if you think you can make full payments on time then you should be
alright with a store branded card. Wallet getting a little too thick? Think twice
before thinning it out by cancelling a card. Cancelling a card can hurt your
credit score because it lowers your available credit limit. A credit score is a
tool used by lenders to estimate your ability to repay debt the lower your
score is the more likely you are to get a bad deal from financial institutions
that's why according to Octavio cancelling a card can have serious
consequences. And it could even lead to higher rates when applying for a
mortgage, car loan, or insurance, plus you could be losing
out on some pretty sweet credit card perks like travel benefits, lowest price
guarantees on products, and even theft protection insurance. If you really don't
want to use a card anymore we recommend just putting the card away
and stop using it rather than closing the account altogether.
Does that mean
you should only have one credit card in your wallet? Not necessarily. Having
multiple cards gives you more available credit and if you have more available
credit and you're managing it correctly you'll be more attractive to potential
lenders. I like this guy. Not only that, but different cards offer different
perks. With multiple cards you can play the rewards game one thing to keep in
mind with some rewards cards: annual fees. For example, airline-branded cards often
have annual fees that can run as much as 450 dollars but they include perks like access to airport lounges, a free checked bag, and priority
boarding so if those benefits outweigh the cost of the fee it might be worth it.
More rewards: awesome. Good credit: even better. That's some advice you can take
to the bank..