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How to bank: Build credit

Credit cards can offer an added sense of flexibility—but you shouldn’t use them like cash and you will be charged interest for maintaining a balance.

Build credit

Managing your credit card wisely will help you build a good credit score; careless handling can limit your future purchasing power.

  • Always pay bills on time. A late payment becomes a bigger balance after interest.
  • It is best to pay in full every month. Whenever possible, pay more than the minimum; minimums are designed to keep the balance from disappearing, and will cost you more in the long term.
  • Don’t open multiple credit cards. When you do, you multiply your fees, interest, and potential for debt.
  • Don’t be fooled by low starting interest rates. Look for how much you will pay in interest in six months to determine how much each purchase will actually cost you.
  • Consider choosing a credit card with a lower limit, which will encourage conservative spending on your part.
  • Don’t treat your credit card like a debit card; your credit limit is not the same as money in the bank.
  • Never use credit cards to afford a lifestyle beyond your means.

Your credit report

It’s a good idea to check your credit report once a year. Your credit report includes your credit history, and will show you who has reviewed your report in the past two years. It will also show your payment history, and the types of debt you have.

You will want to pay attention to your credit score, too. This is a number that suggests how likely you are to pay your bills in the future.