Family Resource Management
Living for Today — Planning for Tomorrow
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Credit Control Tips
- Always look at all the terms before accepting credit card offers.
- Shop for the best deal just like you would any other product or service.
- Know and understand credit card terms:
Annual percentage rate (APR) – The ARP represents the rate of interest you are charged plus fees, expressed as a yearly rate. Look for a low APR if you think you will keep a balance from month to month. If you plan to keep your bill paid up every month, compare annual fees.
Fees – These fees include: annual fee, late fee, and over-the-limit fee.
Grace period – The grace period is the number of days you have to pay your balance before a creditor starts charging interest. Interest rates can be fixed or variable.
Fixed rate – the rate will not change.
Variable rate – the rate can increase or decrease.
- Read the fine print.
- Beware of introductory rates. You might start out with a lower interest rate, but end up with a much higher one later.
- Decide how you will use the credit card and what type purchases are allowed.
- Pay your bills on time to keep finance charges to a minimum.
- Try to pay off your total balance each month.
Buying on credit has advantages and disadvantages.
- Advantages
- Convenience. There is no need to carry large amounts of cash.
- Timing. Use of goods and services that you cannot afford to pay for now.
- Installments. It may be easier to borrow and pay off the debt in monthly payments than trying to save the money upfront.
- Disadvantages
- Overspending. You may buy more than you really need or can afford.
- Interest. You pay an additional charge – adding to the overall cost.
- Future payments. Committing yourself to future monthly payments gives you less flexibility in your future spending.
If you find yourself with more bills than your monthly income can cover, one alternative is to develop a debt-management plan. Completing this plan takes patience, but it works if you really want to get out of debt. To set up a debt-management plan, follow these steps:
- Find out whom you owe and how much you owe;
- Decide how much you can pay back and when you can pay it back;
- Set up a plan for paying back your debts;
- Discuss your plan with your creditors; and (5) Control spending by sticking with your debt-payment plan until debts are repaid. Occasionally look over your plan to see if you are keeping up with your debts and your daily living expenses. If there is a change in your income, you may need to raise or lower your monthly payments accordingly.
