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Credit and managing available credit is a total mystery to most people. But knowing what your credit cards say about your to potential lenders is vital. When you apply for loans, the lender reviewing your application looks at all of the credit you have had in the past, and in particular, how you used the credit that was extended to you.
Why You Need Two Credit Cards
As a general rule, every borrower should have two established credit card accounts. One of these credit cards should be used for purchases that you would ordinarily make with cash if you did not have access to a credit card - such as gas, groceries, and everyday essentials. Your second credit card should be used strictly for emergencies - such as to pay for unplanned car repairs or other emergency expenses.
The first card you should pay off in full every month while the second card should be paid off more slowly, always running a balance of 30% of the total credit line. For example, on a credit card with a $1000 limit, always pay off everything you have charged on the card except for $300.
Why does it even matter how many cards you have? The answer is simple. Someday you may be in the market to make a major purchase - such as a home, and by showing wise and responsible use of your credit lines now - you will not only qualify for a home loan or other major loan, but you will reap the reward of a great interest rate and more friendly terms and conditions. Further, carrying too many cards might make you more willing to overextend your finances by charging too much, which can prove detrimental to your credit if you fall behind on payments.
Be Selective
You should be selective, also, in the type of card that you take out. If you have high interest rate cards in your wallet right now, it may be time to get a new card and transfer your old balances to it. Look for cards that feature a zero percent interest rate for at least the first year, with no charge for transferring your old balance over. Other favorable terms to look for include no account fees, no maintenance fees, no monthly fees, and no fees for cash advances.
Beware Of Fine Print Stipulations
When you take out a card, be very careful to read the fine print that accompanies your credit card account, also known as the Terms and Conditions. These important terms and conditions govern your use of the card and how your account will be treated if certain instances occur. For example, the fine print can tell you if the zero percent interest you are paying on your credit card can be escalated to 20.99% if you are late with just one payment. There are lots of things that can go wrong with a credit card account, so be prepared to avoid common mistakes that cardholders make by reading your terms and conditions carefully.
While shopping for your new credit card, be sure to check online for great deals. There is very competitive atmosphere on the Internet between credit card issuers that can yield you quite a bit of savings with just a bit of comparison shopping.
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