Cover Story

Keeping a close eye on credit

By None

ROCKFORD WOMAN

Aug 26, 2008 @ 08:44 PM

Credit cards can be our friends if we’re smart using them.

Tammy Alger, 45, vice president/regional sales management for AMCORE Bank, says a credit card is a useful tool.

“There’s the convenience for a short-term loan purpose. It helps you with future needs like buying a home or a car. The way you handle that card is critical and can help with larger purchases later,” she says.

Younger adults, Alger suggests, probably need a Visa or MasterCard and maybe a couple of department store cards “to establish credit and show that you can act properly and under the terms of the agreement.”

As far as the credit limits on those cards, be alert.

“You don’t want to have more (debt) than the ability to pay back in a reasonable time,” Alger says.

That reasonable time varies depending upon the size of the purchase. For example, the person who is using a credit card to buy clothing should make sure to pay the balance on the next monthly statement; for a larger purchase such as a computer, maybe a year.

She suggests paying off the debt monthly because of the interest rate.

“If you are using it as a loan, make sure that you have a competitive rate. Rates vary for a couple of reasons,” Alger says. “They can be issuer-driven and driven by your personal credit.”

And watch that monthly statement — a credit card company has the ability to adjust the interest rate at any time.

“Don’t spend more money than you can afford,” she says. “Don’t impulse buy.”

Sound advice.
According to the Pew Research Center, about 58 percent of adults have a monthly credit card bill. Only about 24 percent of those card holders pay off the balance each month.

Alger says that it is important before getting a card to understand the terms of the card, especially for those who are new or have poor credit.

And make sure to keep it secure.

Common ways a credit card can be compromised is using it for purchases on an unsecured Web site and using it at a restaurant where the wait staff takes it to another location. The card number and three-digit number on the back can easily be copied.

“Be diligent,” Alger says. It’s a good idea to check transaction history online. Look for unusual activity. Reconcile your receipts with your statement each month. And notify your card issuer immediately if something is not right.

“The nice thing is that you are protected if there is unusual activity,” she says.
And, Alger notes, “It’s still safer than a check.”