Financial Literacy - Credit savvy
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3. Pay on time

Pay more than 30 days late and watch your credit score fall, your rate skyrocket and a late fee appear your statement.

Your payment history accounts for 35 percent of your FICO score. Paying more than 30 days late to an issuer could bring down your credit score and leave a blemish on your credit report for up to seven years.

Besides the credit score ding, the late fee will get you right where it hurts financially. As of mid-August, the average late fee is $22 for fixed-rate cards and $29 for variable-rate cards, according to Bankrate's weekly survey of credit card interest rates. (Check out current rates on Bankrate's Interest Rate Roundup.)

To avoid paying late, mark a mail-by date on your calendar, or sign up for e-mail alerts if you pay bills online.

Allow for processing time, which could take several days. Bockstein says the New York State Consumer Protection Board has heard from consumers who think they paid on time, but were late because the payment either wasn't received or posted on time.

Even online bill payers should call their issuers and ask when the payments get posted if they're unsure, she says. "Sometimes what they think is 24/7 convenience is not because it's not posted."

If you're ever late, for whatever reason -- you forgot about the bill, went out of town, got sick, etc. -- call the bank and explain why you were late. If it's your first time paying late, likely the issuer will waive or reduce the fee. You don't want to make this request too often, though. "I suspect they'd probably understand once a year, but not once a month," says Cate Williams, vice president of financial literacy at Money Management International, a nonprofit credit counseling firm.

Do the same if your rate increases due to a late payment, referencing your previously stellar payment history. Bockstein says, "Sometimes the issuer will make an allowance and adjust accordingly and may waive a fee or penalty once or twice if you have a good record."

4. Pay in full

Pay the entire amount due every month and you'll never pay interest.

"We advocate paying the bill in full," says Bockstein. "Just paying the minimum won't get you out of hot water."

Even when you have a zero percent introductory rate on a new card, work at paying off the balance. Many card issuers have reduced the introductory period to six months or less, so make sure you know when the teaser rate expires. To enjoy free financing, make a plan: Divide the total amount of debt by the number of months in the introductory period and that's your monthly payment. For example, if you charged $3,000 to a card with a six-month zero percent interest introductory rate, your monthly payment should be at least $500. Make the payment even fatter when you have the money to do so.

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5. Pay down your balance

When you can't pay in full, try to pay more than the minimum. Our minimum payment calculator shows how long it will take you to pay off debt by paying the minimum. It will motivate you to reduce that outstanding balance more quickly.

Paying down the balance should also boost your credit scores. Balances owed make up 30 percent of your FICO score. Experts disagree over the ideal utilization ratio, but many advise using less than 30 percent of your card limit. High balances can hammer your credit scores and result in a credit line reduction or an increased interest rate.

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Product Rate Change Last week
Balance Transfer Cards 15.73%  0.01 15.72%
Cash Back Cards 16.43% --0.00 16.43%
Low Interest Cards 10.98%  0.02 10.96%
 
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