Using a credit card wisely is an important step in building a

great credit rating. If you're trying to re-build your credit or if

you're young and just starting out, pay close attention the

next time you receive a new card offer in the mail or online.

When you're trying to build a positive credit history for

yourself, using the right credit card makes sense. Making small

purchases and then making your payments on time each

month is a simple, reliable way to build an outstanding credit

report.

WHAT TO LOOK FOR ON A CREDIT CARD APPLICATION

If you receive a credit card application that appears to offer a

low monthly interest rate, don't make a decision until you turn

it over and closely examine the Disclosure Box. In it you'll find

a more important measure of credit terms - the Annual

Percentage Rate, or APR. By federal law, the Disclosure Box

will also tell you whether or not the card has what is called a

grace period - a number of days, usually 25, until your

purchase starts to accrue finance charges. If a card has a

reasonable grace period and you pay off your balance at the

end of each billing cycle, you won't have to pay finance

charges. It isn't difficult to find credit cards that offer these

grace periods, so if the Disclosure Box doesn't declare one

then throw the application in the trash and look for a better

offer.

If you don't have any credit history at all, a credit card

company won't want to give you a very high credit limit, but

that's probably best when you're just starting out. You don't

want to be tempted to go into serious debt with your very

first credit card.

HOW TO CALCULATE YOUR MONTHLY FINANCE CHARGES

Ideally you want to pay off your balance each month to avoid

paying any finance charges, but when that isn't possible it's

important to know the actual cost of the items you purchase.

The annual percentage rate, divided by 12 months, gives you

the periodic rate that will be applied to your outstanding

balance each month. You can estimate what your monthly

finance charge will be by multiplying the periodic rate times

the outstanding balance. It may sound complicated at first,

but taking the time to learn this simple equation can make a

big difference in how you use your credit card.

When you're able to see how much you actually spend on an

item that you don't pay off at the end of the month, it might

help you to resist the temptation to over-use your card. An

item that you want to buy might be on sale at the time you

purchase it, but if you don't pay off your balance at the end of

the month then those finance charges can dramatically

increase the actual amount you'll end up paying.

USE YOUR CREDIT CARD AS THE STRONG FINANCIAL TOOL

Credit cards are only one of the tools available to help you

build a positive credit history. Making on-time payments for

other forms of credit, such as rent and utilities, are also

important. Depending on your situation, within 1-2 years your

credit rating will be improved enough that you no longer need

to use your card for new purchases to maintain your good

credit. Use these tools wisely, and they'll help build your

financial future like no other!