Six things you should know about credit cards

“Just put it on your credit card.” These can be dangerous words. We live in a largely cashless society. In fact, credit cards are becoming more common than cash in our wallets. Credit cards can be super-helpful, allowing you to track your spending, rent a car and pay for things easily without having to carry around a lot of cash. Even better, you get a couple of weeks to pay that money back before the bank starts charging you interest. But credit cards can also get you into a lot of trouble if you’re not careful.

Six things to keep in mind. 1. You’re spending real cash.

Studies show it’s easier for people to tap their credit card than to pull cash out of their pockets to pay for things. But don’t kid yourself—you will have to pay that money back, and if you don’t pay in full by the due date you’ll pay interest too.

2. Credit card interest rates are higher than for other types of loans.

In fact, they are three to five times higher— on average, about 19%. The interest rate on a credit card is referred to as the Annual Percentage Rate (APR) and by law, all lenders must list it in the credit card agreement. Make sure you know what yours is. 3. You should pay the full balance (total amount owing) every month … on time. Most credit cards offer a grace period. That’s the time (usually 20 to 30 days) you have to pay off the loan before the bank starts to charge interest. If you absolutely can’t pay off the balance, at least pay as much of it as you can manage, before the deadline. 4. Don’t just make minimum payments. Credit card issuers usually allow you to make a minimum payment by the due date each month—that’s the minimum amount you can pay to avoid other penalties. But if you pay only the minimum balance, there’s a good chance you’ll be forking out for your purchase long after you’ve had to replace it. Consider this example: You buy a new cell phone, with all the bells and whistles, for $600. If you make only the minimum payment, it will take you more than five years to pay off your debt. On top of the cost of the phone, you will pay an extra $323 in interest. Check your credit card statement for information about how long it will take you to pay off your balance if you only make the minimum payment.

5. Avoid cash advances.

You can use your credit card to borrow cash. That’s called a cash advance. But the interest rate on a cash advance is usually even higher and there is no grace period; you pay interest on the money from the moment you take out cash until you pay back every single penny. Banks may also charge you a fee for a cash advance. Use a cash advance only for a dire emergency.

6. You need to check your bill every month. Billing errors can happen with credit cards.

If you see a purchase on your statement that you didn’t make, be sure to correct the mistake right away. Here’s how: If you haven’t ever been to the business in question, call your credit card company immediately—it’s possible you’ve been a victim of identity theft. But if you have made a purchase from the vendor listed, your best bet is to contact them directly. Make sure you always keep your receipts just in case you ever need to show them to the vendor. If you don’t get satisfaction, call your credit card provider with all the evidence at hand.