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Take charge of your credit cards

Financial Tip of the Week from the Iowa Bankers Association:

Credit cards can be convenient, safe and useful financial tools, but must be selected and used wisely. The average credit card debt of a low- and middle-income household in America is $8,650 according one survey and continues to increase. Consider these timely tips for choosing and using your credit cards.

Before choosing a credit card...

1. Shop around before accepting a card offer. Terms and conditions vary widely, so it's important to compare offers. The Annual Percentage Rate (APR) is the amount of interest assessed on the outstanding credit card balance. APRs can vary greatly and different APRs can be charged on the same card based on types of balances carried on the card!

· Purchase balances reflect transactions initiated to purchase goods or services in a store or online.

· Cash advance balances are incurred from cash advances obtained at ATMs, convenience checks or at a bank. The APR is typically higher for cash advances, interest starts accruing from the date of the advance and transaction fees are often charged.

· Transferred balances. Many credit cards allow you to transfer balances from other cards. Be aware transfer fees are often charged for this service and typically the low APRs advertised are only temporary.

2. Read the fine print looking for hidden fees and penalty rates. Many cards have punitive fees including late fees, cash advance fees, over-the-limit fees and balance transfer fees. Higher penalty interest rates may also be charged if you exceed your credit limit, make a late payment or if your payment is returned because you don't have enough money in your account.

3. Know how your payments will be applied. Most companies apply payments to balances with the lowest APRs first. So if you don't pay the balance in full each month, you will be paying longer on the balances with higher APRs, like cash advances and transfer balances.

4. If you typically pay the balance off each month, look for a card with low or no annual fee and extended grace periods.

5. If you do not pay the balance in full each month, you should focus on cards that offer lower APRs for the types of balances you carry. Also, pay close attention to how and when your APR may change.

When using a credit card...

1. Use your credit wisely. Don't charge more than you afford to repay each month.

2. Pay off all balances in full every month. If that is not possible, at least make your minimum payments on each card. Then continue to pay as much as you can, making the largest payment on cards with the highest interest rate.

3. Know your credit limit and stay below it! Card issuers charge a penalty for each transaction that exceeds your credit limit. Exceeding your credit limit can also damage your credit score.

4. Review your credit card statements each month. If you notice any errors or suspicious activity, contact your credit card company immediately. The card issuer is required to investigate errors reported to them within 60 days of the date your statement was mailed to you.

5. Take action immediately if your card has been lost or stolen. Notify your credit card company of the loss as quickly as possible. It is a good idea to keep a record of your account numbers, expiration dates and telephone number for each credit card company in a safe place in case your card is lost or stolen.

6. Seek reputable credit counseling as soon as financial problems arise. Information regarding free counseling services in your area can be found on the National Foundation for Credit Counseling website at www.debtadvice.org or by calling 1-800-388-2227.

7. Reduce the number of direct mail offers you receive for new cards by calling 1-888-5-OPTOUT (1-888-567-8688).

Information provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. For more information go to www.mysmartfinances.com or www.iowabankers.com.

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