Are Credit Cards Bad?

There’s no denying that cards get a lot of people in a lot of financial trouble. But the real answer to this question is up to you.

If you use them well, credit cards can help you build a positive credit history. Take advantage of a low or no fee card offer to get started. Charge a little. Pay in full each month — and be sure to pay on time.

Charging without thinking about your budget is where things get sticky. It can be easy to forget how many times you stopped for coffee, indulged in new music, or decided to eat out — and it all adds up.

Failing to pay in full each month can end up costing you big time due to high interest rates credit cards typically charge. If you keep a balance, keep it less than 20% of your available credit limit — and be sure to pay on time.

If you decide to open a credit card account, keep these rules in mind:

• Fees and rates. Look for no annual fee and low-interest rates. Watch out for low introductory rates that balloon after a while — a competing card may be a better deal in the long run.
• Terms and conditions. Check the credit card agreement. Is there a grace period before interest is charged? Are there penalties that could up your APR? When is payment due and what are the late fees?
• Avoid cash advances. Most credit cards charge interest (high interest) on cash advances as soon as they post to your account. It’s best to avoid using this feature altogether.

One more thing: Don’t apply for more than one credit card at a time. Each new credit request appears on your credit report. Too many new accounts at once lowers your credit score and reduces your chance of being approved.