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Basic Finance
How Credit Affects You
Preparing for Home Ownership
Steps for Buying a Home
Life as a Homeowner






 
Additional Resources
Module 2
How Credit Affects You
Basics of Credit
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Managing Credit Cards

Avoid Damaging Your CreditOnce you’ve shopped around and found the card with the best rates and features for you, it’s important to manage your new credit card wisely. Making late payments or missing payments altogether can severely damage your credit. Key guidelines to follow include:
  • always pay your bill on time
  • make more than the minimum payment
  • if you have the available funds, try to pay your bill in full each month and avoid the high credit card interest charges
Paying More Than the MinimumEach month your credit card statement indicates a minimum payment. This is the smallest amount you can pay for the month and remain in good standing with the credit card issuer. Even though paying the minimum keeps your credit record clean, here’s why it’s a smart strategy to pay more than the minimum amount:

Why It's Smart to Pay MoreAs the chart below shows, if you have a card balance of $4,000 at an 18% interest rate, it will take you 32 months and cost you more than $1,000 in interest payments if you pay only the minimum each month (typically 4% of the balance). (Note: this repayment scenario assumes that no other charges are added to the balance during this period.) By increasing your monthly payments by $40, you’ll save over $200 in interest charges and pay off the balance eight months earlier! Remember, if you have the available funds, try to pay your bill in full each month and avoid paying the high credit card interest charges.

Outstanding balance: $4,000 $4,000 $4,000
Interest rate: 18.00% 18.00% 18.00%
Monthly payment: Minimum payment (4%)
$160		 $15 more than minimum:
$160 + $15 = $175		 $40 more than minimum
$160 + $40 = $200
Total interest charges: $1,051.17 $935.15 $791.31
Loan payoff in months: 32 months 29 months 24 months

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