Borrow Responsibly

With a new tax deduction on interest, we want to encourage spending that consumers are holding off on out of fear or uncertainty: the tax break can be your personal subsidy to buy that new car, fix up your apartment or make needed repairs, get the clothes or other things you may desperately need.

What we don't want to encourage is irresponsible borrowing. Here, you'll find some basic advice on using credit wisely, as well as information on two dangerous trends in credit card lending you may be unaware of. You'll also find links to lenders who are very fair about their credit underwriting standards - and, they tend to charge far lower rates with lower penalties than others.

BASIC ADVICE

Before you sign up for any credit card, shop around. Check the terms and conditions. Know what you're paying for - and when. Specifically:

• Steer clear of cards that come with an annual fee. There are plenty out there that don't.
• Check the annual percentage rate, or APR. This is your annual interest rate.
• Beware of low introductory rates. They can jump up higher - and faster - than you may think.
• Avoid variable rate cards - those that change with market conditions - unless you're prepared to pay very close attention to what you're paying.
• Ask about transaction fees. With some cards, they can be substantial - check out the words of caution below.

Getting the right card is one thing. Using it wisely is another. It's smart to:

• Stay well below your credit limit. Most experts suggest no more than 50%.
• Be sure to pay the amount due in full each month - when it's due - to keep your credit report clean and to avoid some serious default charges (again, those words of caution are key).
• Keep your receipts and compare them to your monthly statement. If something doesn't look right, report it immediately.
• Review your credit history regularly. You're entitled to one FREE look at your report from the three major bureaus - Equifax, Experian and Trans Union - every year.

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