Have annual fees that escalate over time offer an

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Have annual fees that escalate over time. • Offer an initial interest rate that starts out low and then escalates after a relatively short period of time— six months typically—unless the higher rate is still lower than other cards you can qualify for. Tip 146
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Using Credit Responsibly If you transfer your credit card balances to a new card in order to take advantage of its low intro- ductory interest rate, unless you pay off the transferred balance before the card’s interest rate goes up, you may end up spending more to pay off the transferred debt than if you had not done the balance transfers. Offer you rewards. Although you may be attracted to the idea of earning frequent flier miles or some other type of benefit by using a reward card, this type of card usually has a higher than average interest rate. Furthermore, unless you run up a large balance on the card, it will probably be years before you have enough points accrued to be able to benefit from the rewards. Before you transfer a credit card balance, read and understand all of the terms and conditions of the card you are transferring to before you complete the transaction. Consider How You Will Use a Credit Card When you are evaluating credit card offers, take into ac- count how you intend to use the card. That’s because whether or not you intend to carry a card balance from month to month or plan on paying your full balance each month will make some terms of credit relatively more important than others. For example, if you plan to Warning Warning 147
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Credit Hell pay off your credit card balance each month, you want a card with a no/low annual fee and a long grace period— at least 25 days. However, if you intend to maintain a balance on your credit card, then look for a card with a low APR and a consumer-friendly balance calculation method. Once You Have a Credit Card, Use It Wisely Once you are approved for credit, following the practical advice in this section of the chapter will help you manage it wisely. I have already provided some of this advice in other chapters but it is important enough to repeat: Pay your credit cards according to the terms of your credit card agreements. Consider paying your credit cards online or over the telephone to avoid being late with your payments and incurring late fees. Being late will damage your credit record as well as your credit score. Also, depending on the terms of your credit card agreements, being late with just one account payment could trigger a steep increase in your interest rates. Watch out for credit card agreements that enti- tle the credit card company to raise your interest rate if your credit history shows that you were late paying some of your bills even if you have been paying your credit card on time. This pro- vision is called a universal default clause.
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