Tips for using credit cards

Credit cards can be good financial tools, if used the right way. Follow our tips to understanding your credit cards.

A credit card can help you build credit and manage your money. Follow these steps and precautions to make sure you fully understand your credit-card plan.

• Shop around for credit-card terms that are best for you.
• Make sure you understand the terms of a credit-card plan before you accept the card. Review the disclosures of terms and fees that must appear on credit-card offers you receive in the mail.
• Pay bills promptly to keep finance charges as low as possible.
• Keep copies of sales slips and promptly compare charges when your bills arrive.
• Protect your credit cards and account numbers to prevent unauthorized use. Draw a line through blank spaces above the total when you sign receipts.
• Keep a list of your credit-card numbers and the telephone numbers of each card issuer in a safe place in case your cards are lost or stolen.

Secured vs. unsecured cards
Secured and unsecured cards can be used to pay for goods and services. However, a secured card requires you to open and maintain a savings account as security for your line of credit; an unsecured card does not.

The required savings deposit for a secured card may range from a few hundred to several thousand dollars. Your credit line is a percentage of your deposit - typically 50 to 100 percent. Usually, a bank will pay interest on your deposit.

In addition, you also may have to pay application and processing fees, sometimes totaling hundreds of dollars. Before you apply, be sure to ask what the total fees are and whether they will be refunded if you’re denied a card. Typically, a secured card requires an annual fee and has a higher interest rate than an unsecured card.

This information is adapted from "Choosing and Using Credit Cards" published by the Federal Trade Commission.