Consumer Credit Guidelines

People who understand how to use their credit cards to their advantage can get the best deals from creditors and lenders when they open new accounts. That's because consumers' management of credit cards is tracked in their credit files, which are used by creditors and lenders to determine whether they'll approve a credit or loan application. They also used credit-file information to determine what interest rate an applicant will have to pay.

Credit Rating

One of the best ways to manage your credit is to understand how various actions affect your credit rating. The Experian credit-reporting agency provides advice on its website on how to build a good credit history. Among other things, Experian recommends avoiding late payments. Credit-card payments that are at least 30 days late are usually documented in consumers' credit files, which can lower their credit scores. A low credit score can cause other creditors and lenders to reject your applications for credit-cards and loans or charge you a high interest rate if your applications are approved. Experian says creditors view recent late payments as a sign that consumers probably won't be able to pay their debts in the future.

Credit Protections

Consumers shouldn't assume credit-card companies have the upper hand in disputes with cardholders. Some federal laws protect consumers' rights when they deal with credit-card companies. For instance, the Credit Card Accountability, Responsibility, and Disclosure Act generally prevents card issuers from increasing interest rates on customers' existing balances, and issuers must notify customers 45 days in advance of raising rates on new transactions. The Truth in Lending Act limits cardholders' liability to $50 for fraudulent charges if their credit cards are stolen or used without their knowledge.

Credit Terms

Credit-industry terms that appear in credit-card agreements and on customers' monthly statements can be confusing. A web site managed by the U.S. Federal Reserve Board provides a glossary to help consumers decipher such terms. For example, fixed annual percentage rates are explained. Such interest rates are set at a particular percent that can't be changed for the period of time outlined in a credit-card agreement. However, the rate generally can't be raised as long as your account remains open if a card issuer doesn't specify a time period for changing it.

Credit-Card Options

Consumers who are shopping for a credit card should make getting the lowest interest rate they can their top priority, especially if the card balance won't be paid off every month. A Wall Street Journal article titled "Credit: Getting a Good Deal on Your Credit Card" urges consumers who don't pay off monthly balances not to choose a credit card based on cash-back rewards. That's because cardholders can get as little as a penny or two back on every dollar they charge to rewards cards. Yet every dollar that's charged to a card that isn't paid off could cost a cardholder as much as 18 percent in annual interest, which is 18 cents per dollar charged.