If You Don't Know This Number, You Shouldn't Swipe a Credit Card Ever

Someone hands a credit card to a cashier.

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You'll often hear that using credit cards is your ticket to landing in debt. But that's by no means guaranteed to happen.

If you make a point to track your credit card spending and only charge expenses you can afford to pay for in full by the time your bills come due, you can enjoy the convenience of credit cards without accruing costly interest. In fact, the upside of using credit cards is getting to collect rewards or cash back on the purchases you make. So in some ways, shopping with credit cards could actually save you money.

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But if you're going to use a credit card, there's one key number you need to know. And until you commit it to memory, you shouldn't even think about using your credit card.

What does your credit card's interest rate look like?

You might think you'll be able to pay off your credit card bill in full by the time it's due. But sometimes, things happen.

What if you end up needing to write an $800 check to cover an unexpected car repair, and as such, you don't have enough cash left over in your checking account to pay your full credit card balance? Suddenly, you're looking at paying some amount of interest on your balance.

Now that interest may be minimal if your balance isn't that high and you're only forced to carry it for a couple of months. But still, you should absolutely know what your credit card's interest rate looks like before you use it.

This especially applies if you have multiple credit cards with different interest rates attached to them. Let's say you're not sure you'll be able to pay off your credit card in full in a given month -- maybe because you're loading up on extra holiday purchases, for example. If you have one credit card charging 16% interest and another one charging 20% interest, wouldn't it make more sense to use the card with the lower interest rate?

Interest charges can really add up

One thing a lot of consumers don't realize about credit card interest is that it tends to compound daily. So, let's say you carry a $1,000 balance forward. By the next day, that balance might be $1,003 due to accruing interest. But the day after that, you might accrue interest on $1,003, not just $1,000.

So all told, you could end up paying a lot of interest on a credit card balance even if it starts out as a small one. And the higher the interest rate on your credit card, the more carrying a balance will cost you.

Know the details of your credit card

Your credit card's interest rate isn't the only important detail you should know about. It's also essential that you learn when your monthly bills are due, what late fees might amount to and when they're charged, and what your spending limit looks like. The more you know about your credit card, the better equipped you'll be to make smart choices with it.

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