'Know' Your Credit Cards

Credit cards are a common part of daily life for most people. With two, three or more cards in their wallet, it's easy to treat them like plastic cash. They are, in fact, an entirely different animal. As such, credit cards should be used carefully and responsibly, to avoid tons of potential trouble down the road.

How many credit cards do you own? If you're not sure of the number right off the top of your head, it's likely that you have too many. People often mistakenly assume the more credit cards they have the more buying power they possess. They also think that if the credit card companies are sending them offers, they must have good credit and deserve to have them. The truth, however, is that the more credit cards you have in your name, the more of a negative effect they can have on your credit report. Every active credit account that you have is considered a potential liability to your credit – as far as lenders are concerned, it's possible money that you could owe. So, if you've been gathering credit cards with a number of department stores, it might be wise to close the ones you don't need as a way to keep your credit score from faltering.

Watch your spending habits. Many people get too comfortable using credit cards and treat them like cash. They purchase all sorts of things on their cards and don't think about how those numbers can add up. But consider these small, insignificant purchases: a $5 snack on Monday, a $7 breakfast on Tuesday, a $4 latte on Wednesday, an $8 lunch on Thursday and a $13 movie excursion with popcorn on Friday. Separately, these are all small charges; no big deal, right? Well those 'small' charges add up to $37 a week, or $148 extra a month that's being put on your credit card bill. You also need to be aware of the other charges that are being applied to your cards, the charges that the credit card company levies on you. Do you know what interest rates you're being charged? If you don't fully pay off your credit card purchases every month, that interest will be tacked on to what you owe.

Also, get to know your grace period. This is the time during which you have the option to pay off your credit card charges under a same-as-cash policy. Many cards provide from 20 to 28 days; however, others can be as short as 15 days. Still other credit cards offer no grace period at all, charging interest from the day of your purchase. If at all possible, take advantage of this time period to pay off your purchases, and you'll escape any interest charges.

Find out what types of late fees may be charged if you don't make a payment on time. Many cards have fees of $30 or more. What's more, if you are late with a payment, your interest rate may also be increased as a consequence. All of that simply equates to more money out of your pocket and into the card company's coffers.