Tip #1: Live within your means.
This may sound obvious, but it's extremely important, because living within your means will keep you from amassing even greater debt.
Tip # 2: Pay your bills on time.
Every time you pay a bill on time, you build your credit history and put yourself in a better position to obtain credit at lower rates in the future. Pay late and not only will you be faced with fees, but you'll be hurting your credit standing.
Tip #3: Pay more than the minimum.
Say you have a $2,000 balance and your minimum monthly payment is $40. At an 18% interest rate, you'll end up paying nearly $3700 over 7 years! If you pay double the minimum, $80, you'll pay only $2526 in just over 2 and a half years. You will save $1200 and 5 years of payments.
Tip #4: Avoid credit card add-on programs.
Many credit card companies offer various services and products to their card holders, like card registration services, insurance, and card loss/theft protection. Most cost money and are unnecessary for the typical consumer.
Tip #5: Don't chase lower rates by transferring balances.
This is a tricky process that involves fees, penalties, and other "catches," and usually ends up costing more than it saves. Balance transfer offers almost always have a low teaser rate that isn't fixed, which usually jumps much higher upon expiry. Plus, there are often fees from both banks involved, meaning you pay twice.
Tip #6: Know the terms of your credit agreement.
Read the fine print! For example, some cards charge a penalty of 32% for making three late payments within six months, and will increase your interest rate for making two late payments in a year. Some charge an inactivity fee of $15 or more for not using an account within a six-month period.
Tip #7: Pay off accounts with the highest interest rates first.
When you pay your credit card balance, you get an instant "return" on your money. If you have two cards, one with an interest rate of 18% and one with a rate of 24%, and you pay the 24% balance first, you're instantly saving 6% on your money!
Tip #8: Don't open new credit too soon
Don't be surprised if you get multiple offers for new credit. Banks know you may be more likely to "bite," and they want to "hook" you. Shred and throw these offers away!
Tip #9: Monitor your statements.
Open and read all of your statements. It is your responsibility to report errors as soon as you see them.
Tip #10: Monitor your credit reports.
At least once a year, you should get copies of your credit reports and review them for errors. You can get them free at www.annualcreditreport.com.