This general "rule of thumb" helps you understand how much credit you can afford. Credit cards are loans, so avoid borrowing more than 20 percent of your annual net income on all of your loans (not including a mortgage). And payments on those loans shouldn't exceed 10 percent of your monthly net income.
Credit cards offer many advantages. There is the convenience of being able to buy needed items now and the security of not having to carry cash. You also receive fraud protection and in some cases rewards for making purchases.
With these advantages also come responsibilities. You need to manage credit cards wisely by understanding the card's terms and conditions, staying on top of payments, and knowing the true cost of purchases made with credit. Using a credit card is like taking out a loan. If you don't pay your card balance in full each month, you'll pay interest on that loan.
The best way to maximize the benefits of credit cards is to understand your financial lifestyle - your money needs and wants. Once you determine how you'll use a credit card, it's important to understand all of the card's features including:
Some credit card issuers offer free, personalized and automatic alert messages to your phone and email to help you keep track of:
Credit cardholders are entitled to protections: