Keep Credit Cards Under Control, Improve Your Credit Record

by FTC

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Do The Math

Keep in mind that credit card interest rates and minimum monthly payments affect how long it will take to pay off your debt and how much you'll pay for your purchase over time.

Suppose when you're 22, you charge $1,000 worth of clothes and CDs on a credit card with a 19 percent interest rate.

If you pay $20 every month, you'll be over 30 by the time you pay off the debt.

You'll have paid an extra $1,000 in interest. And that's if you never charge anything else on that card!

Keep Your Credit Record Clean

Good credit is important, now and in the future. In most cases, it takes seven years for accurate, negative information to be deleted from a credit report. Bankruptcy information takes even longer to be deleted - 10 years.

Keep Credit Cards Under Control

Whether you shop online, by telephone or by mail, a credit card can make buying many things much easier; but when you use a credit card, it's important to keep track of your spending. Incidental and impulse purchases add up, and each one you make with a credit card is a separate loan. When the bill comes, you have to pay what you owe. Owing more than you can afford to repay can damage your credit rating.

Keeping good records can prevent a lot of headaches, especially if there are inaccuracies on your monthly statement. If you notice a problem, promptly report it to the company that issued the card. Usually the instructions for disputing a charge are on your monthly statement. If you order by mail, by telephone or online, keep copies and printouts with details about the transaction.

These details should include the company's name, address and telephone number; the date of your order; a copy of the order form you sent to the company or a list of the stock codes of the items ordered; the order confirmation code; the ad or catalog from which you ordered (if applicable); any applicable warranties; and the return and refund policies.

Improve Your Credit Record

A lot of people spend more than they can afford and pay less toward their debts than they should. To get control over your finances and to manage your debt, try:

Budgeting - In many cases, people design and then stick to a budget to get their debt under control. A budget is a plan for how much money you have and how much money you spend. Sticking to a realistic budget allows you to pay off your debts and save for the proverbial rainy day.

Credit Counseling - Many universities, military bases, credit unions and housing authorities operate nonprofit financial counseling programs. Some charge a fee for their services. Creditors may be willing to accept reduced payments if you're working with a reputable program to create a debt repayment plan. When you choose a credit counselor, be sure to ask about fees you will have to pay and what kind of counseling you'll receive. A credit counseling organization isn't necessarily legitimate just because it says it's nonprofit. You may want to check with the Better Business Bureau for any complaints against a counselor or counseling organization. Visit www.bbbonline.org for your local Better Business Bureau's telephone number.

Bankruptcy - Bankruptcy is considered the credit solution of last resort. Unlike negative credit information that stays on a credit report for seven years, bankruptcies stay on a credit report for 10 years. Bankruptcy can make it difficult to rent an apartment, buy a house or a condo, get some types of insurance, get additional credit, and, sometimes, get a job. In some cases, bankruptcy may not be an easily available option.

When to Contact Creditors

If you're having trouble paying your bills, contact your creditors immediately. Tell them why it's difficult for you, and try to work out a modified plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. Take action immediately and keep a detailed record of your conversations and correspondence.

Use Caution

Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. Be cautious. Before you do business with any company, check it out with your local consumer protection agency or the Better Business Bureau in the company's location. One rule to remember is that if a credit repair offer seems too easy or just too good to be true, it probably is too good to be true. And knowing your rights can help you steer clear of rip-offs. If you've had a problem, the Federal Trade Commission (FTC) works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, call toll-free, 1-877-FTC-HELP (1-877-382-4357). The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the United States and abroad.

It's a good idea to contact your local consumer protection agency, state attorney general or Better Business Bureau, too. Many attorneys general have toll-free consumer hotlines. To find the number for your state's attorney general, check with your local directory assistance.

About the Author

www.ftc.gov
The Federal Trade Commission (or FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anticompetitive business practices.