Credit cards are great financial tools but they carry a lot of responsibility. Credit cards are loans. They don't give you more money, but simply change the way you pay.
delinquency may prevent you from qualifying for future loans, such as
If you are denied credit because of information contained in your credit report, federal law requires the creditor to provide you with the name, address and telephone number of the credit bureau that supplied the information. If you contact that credit bureau within 60 days of your denial, you qualify for a free copy of your credit report. Review your report closely to ensure the information is accurate. If you locate errors, you are entitled to have it investigated by the credit bureau and corrected free of charge.
It is essential that you understand the terms and conditions of your credit card. Always review the disclosures included with your application and card carriers. Call the credit issuer for further clarification if you have any questions about the terms of the card.
How Much Debt Can I Afford?
It is important to ask yourself, "How much debt can I afford?" The answer lies in a calculation of your debt-to-income-ratio. Simply put, you divide the total amount of your debts by the total amount of your gross income.
Mike and Judy's total gross income per month = $2,000.
Their total debts per month (including mortage or rent) = $700.
$700 divided by $2,000 = 0.35 (or 35%).
If you are a homeowner your debt to income ratio is recommended to be = below 36%
If you are a renter your debt to income ratio is recommended to be = below 26%
|Before you charge something, ask yourself if you'd normally take out a loan to buy it. As a rule, never borrow more than 20% of your annual income (after taxes). Additionally, your monthly payments should never exceed 10% of your monthly net income. Remember, credit cards are loans.|
Total Monthly Debt ÷ Gross Monthly Income = Debt-To-Income Ratio