Credit Cards

There’s nothing wrong with using a credit card, but credit should be used responsibly. Before you use a credit card, know the terms of repayment including the interest rate, annual fees, late fees, and any other fees and penalties.

Most cards allow a “grace period” and will waive interest on purchases if you pay your bill in full each month. Some cards, however, have no grace period and charge interest for the time period between your purchases and your payment even if you pay your bill in full. Interest and finance charges are set by the banks and retailers that issue the cards and can vary significantly.

Making purchases on credit can increase the purchase price by a lot. Depending on your interest rate, paying only monthly minimums can more than double the cost.

Some credit cards also allow you to take a cash advance, which is a withdrawal of cash from your credit card account. Be aware that when you do this, you immediately begin paying interest on the amount you borrow. In addition, you may also be charged a transaction fee and

a higher interest rate than what is typically charged for purchases. Before taking a cash advance it’s a good idea to consult your credit card agreement to really understand the costs you can incur.

If you lose your credit card or it gets stolen, you should report the loss or theft immediately to the bank or company that issued the credit card. If you report the loss promptly, you will not be held responsible for more than $50 of the unauthorized charges on the card.

The Credit Card Act of 2009 protects consumers against interest rate hikes, hidden fees, and deceptive practices. Generally, it does not forbid changes, but requires full disclosure and advance warning. It also places restrictions on over-the-limit fees and requires that all penalty fees be reasonable and proportional.