Things You Should Know about Credit Cards

It's one of the top common items most consumers carry in their wallets. Next to a driver license and photos, millions carry credit cards. This method of payment is now more popular than paying by cash or check. As convenient as they are to use, they can also become confusing when it comes to making payments. Interest rates, minimum payments, and credit utilization are just a few terms often associated with the use of credit cards. Below are things you should consider when using credit cards.

1. Closing credit card accounts may not necessarily raise your credit score.
   Closing credit card accounts can work both negatively or positively for your credit score. It may hurt your credit score by increasing your balance-to-limit ratio. However, it may improve your credit score by reducing the total number of open accounts (lenders may see too many open accounts as the potential for consumers to accumulate high debt). Keep in mind that accounts that are older show your established history with credit, which can positively influence your credit score if they are in good standing, so weigh your options before making any decisions.

2. Creditor inquiries can lower your credit score; however, personal inquiries will not.
   Personal, or "soft," inqu iries, such as checking your own credit report and score, are not included by lenders when calculating your credit score. So when you check your own report, you will not be lowering your score. Whereas "hard inquires," such as those made by lenders checking your credit when you apply for a credit card or loan, are included in your credit score calculation and should be kept to a minimum. Lenders often view too many inquiries as negative.

3. Find the right card that matches your spending habits.
   If you tend to carry a balance each month, you may want a card with a fixed low interest rate. If you frequently buy valuable electronic or computer equipment, cards that offer extra warranty protection may be of interest to you. If you travel a lot, you may like offers with traveler’s insurance and frequent flyer miles.

4. Lenders use different criteria when offering credit cards to consumers.
   You may find some lenders are willing to offer you a line of credit, while others may not. In addition to reviewing the information on your credit report, lenders will also apply their own selection requirements when deciding whether or not to extend an individual a line of credit, as well as what interest rate and other terms to extend to the applicant. It is up to the lender to determine whether you are a good credit risk.

5. Secured card versus unsecured card.
   A secured card is a credit card backed by money that you deposit into a bank account that is linked to the issuing credit card company. That account serves as security for the card and these types of cards are often offered to consumers who have poor credit or limited credit history. Unsecured cards do not require a security deposit. If you find yourself having trouble obtaining an unsecured credit card, it’s often recommended that you apply for a secured credit card to help build up a positive credit history before applying for an unsecured card again.