April 2005 Five Platinum Rules for Using Credit Cards They may look like harmless, even pretty pieces of plastic, but in terms of your finances, credit cards are sticks of dynamite. That's not a knock on credit cards — dynamite is a valuable tool when handled properly. But it can make a real mess when mishandled. Here are five safety tips for a lifetime of credit card use:  1.  Use them sparingly at first. Credit card users get into trouble when the card induces spending. It's probably because swiping a plastic card during a purchase is a little more abstract than handing over a fistful of cash. But we'll defer to the psychology community as to why. We just don't want you to be stuck with an oversized bill at month's end. So, go slow at first. Cap your card spending at $200 a month and then raise it incrementally. If you find that the card is inducing you to spend more than you want, go back to cash and keep the card at home just for emergencies  2.  Keep your cards in a safe place. Always looking for a better deal, and with plenty of offers out there, credit card users tend to acquire a number of cards over the years. Keep a list of all the accounts you've ever opened and keep the cards in a safe, lockable drawer. (See this month's identity theft article.) Do not keep more than one or two in a wallet. If that wallet gets lost, you don't want to have to cancel ten cards.  3.  Don't close accounts. It seems odd. But unless you have an excessive amount of credit cards, generally speaking, you don't want to close them. That open account, even if you haven't touched it in ten years, is your credit history. Closing accounts, especially the older ones, can hurt your credit score. Defining Moments FICO is shorthand for Fair Isaac Corporation, the company that examines individual credit reports and then assigns each of us our credit score. FICO scores range from 300 to 850. This is your financial I.Q. (the higher the better) and basically determines the interest rate you'll get from lenders. For fun … FICO is pronounced "fy-coh." Go into a financial planner's office and throughout your discussions refer to your "fick-oh" score. Oh, the puzzled looks you'll get!  4.  Never, never, never be late with a payment. This does to your finances what cigarettes do to your health. If you are prone to late bills, try this: When you get your statement, mail a check for the minimum that same day. You can then send the balance owed by the due date. And if the balance payment is late, at least you'll avoid a likely $35 late payment penalty, an increased interest rate and an ugly mark on your credit report. Payment history can account for as much as 35% of a FICO score (see sidebar).  5.  Be wary of cash advances. We won't say, "Never take a cash advance from a credit card." Just understand that the reason should truly be an emergency. Advances are usually subject to a 1- to 3-percent transaction fee and then the additional balance is likely hit with a much higher interest than your regular rate. And depending on the fine print, they could work the interest like this: A person carrying a $4000 balance on a credit card adds $1,000 to the balance with a cash advance. They may be paying 13% on the original $4,000 and 29% on the $1,000. But bringing the balance down to $4,000, might not get rid of the 29% rate. Anything you pay toward the balance may go toward the lowest rate portion first. Five Platinum Rules Cutting Transportation Costs Emergency Fund Monthly Money Challenge Getting Organized Identity Theft Short on Cents Past Issues

Debt Matters is a source of general information about personal finance and is not a substitute for professional financial advice. Circumstances vary from one individual to another and advice in these articles may not be right for everyone. The publisher will not be held liable for any damages incurred by following the advice found in Debt Matters.