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Consumer Tip of the Week

 Understanding Credit Cards

Your credit is the foundation of your financial health. Though credit cards have become fairly easy to attain, they aren’t always the best route to go when trying to build your credit. This can be especially problematic for young adults who that lack basic financial knowledge. For some inexperienced users, credit cards offer the option of purchasing things on a tight income that are not a necessity.

Learning to use credit wisely can help you build a strong financial foundation, and if you do decide to build your credit through responsible use of a credit card, it is important to research the terms and know the risks of high interest debt. Look carefully look into the following terms before making a borrowing decision:

  • Interest rate or APR- APR is the annual interest rate you will be charged on a loan or the unpaid balance of a credit card.
  • Length of the loan- as the length of the loan increases, the monthly payment will decrease, but the total interest charge will increase.
  • Finance charge- total cost of the loan stated in dollars.
  • Credit limit- the maximum amount you can borrow at any time.
  • Minimum monthly payment- the smallest payment your creditor will accept.
  • Grace period- number of days you have to pay your bill in full before interest is charged.
  • Over the limit and late fees- the amount you will be charged if you are late with a payment or go over your credit limit. 

If you are looking into a credit card for this reason, you should first ask your credit union. It is likely that they have a card that fits your needs, as well as one with guidelines that helps lead you to using your credit card wisely.  Often times they can steer you in the right direction for what will be most beneficial to your credit, and with rates and fees that you can afford. In the long run, it is not beneficial anyone involved for you to be stuck in a high interest debt trap unable to make your payments.

Again, your credit history is the heart of your financial heath, so take advantage of your right to the information included in your annual free credit report.

Additional Resources

Terminology: Read before you sign

True Cost of Credit: The high cost of credit

Know Before You Owe: Before you ever get into debt, research your credit card options

For more information, please visit the Consumer section of  Or, call the Montana Legal Services Association Helpline at 1-800-666-6899.

This Consumer Tip and is a joint project of Montana's Credit Unions and Montana Legal Services Association. has information about consumer issues, housing, money management, and more.

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