Whether you’re a first-time credit card user, or you already have one, but you aren’t really sure about the best way to use it, there are a lot of things you need to know. People regularly misuse their credit cards, which can lead to crippling debt and other financial problems. There are many different types of cards and many different requirements that need to be met. Here are some of the most important things you need to know before you decide to get one for yourself.
Credit Limits
It is common knowledge that there are limitations to the sum you can borrow. And you should remember that you should never reach it. It can lead to unpredictable fees and further limitations. The most common advice is to use your credit card as little as possible. In fact, the recommended charge is between 10% and 30% of your limit. For a certain amount of time, depending on the deal you made and the type of card you chose, your limit will be low. However, it will grow with time, and you will even be able to ask for a limit increase.
You Can Get Bonuses
Besides the increase in your credit score, you can get other types of benefits when using your card. They are designed to save you money. If you use an AmEx Gold Card, you can get additional credit and reward points for dining out, getting groceries, and even flying with certain airplane companies. Many people don’t research the benefits of different credit card types. Because of that, you should do thorough research into the bonuses you can get with each offer.
Credit Card Terms
When you apply for a credit card, make sure to read every single term thoroughly. Like with any other contract, there are certain responsibilities to which you are bound. If you avoid or are unable to fulfill them, you will be additionally charged for many penalties and fees. That is why you should always be aware of the consequences. Be careful and research your options. When you agree to a deal on a whim, you may be signing up for your financial doom.
Types of Credit Cards
We previously mentioned that there are different types of credit cards that go with different terms and bonuses. Credit cards are becoming more and more popular since their invention in the fifties. Nowadays, you will have so many options that you would have a big problem discerning them. That is why the first step you take should be deciding on is what is your card’s purpose.
Application Process
One of the biggest things that determine which card you will be able to apply for is your credit score. If you are a first-time user, and it is your start in that world, you should expect a lower credit limit. Never apply for a card that requires better credit than you already have. Your application will probably be rejected. Start small and then build up.
Grace Period and Interest
The grace period is the term that signifies the time during which you should pay off your balance. If you don’t, you are entering a debt-zone. Companies that give out credit cards are not required by law to give a grace period. However, most of them do. Interest rate is the penalty you will pay. You agree on it the moment you get the credit card.
Don’t Spend More Than You Can Afford
This seems like the most obvious advice you can get. But it is the biggest mistake people make when applying for a credit card. Before you put in your application, it is crucial to have a full picture of your financial situation. As we previously said, you shouldn’t get even close to your credit limit. The offers you get might seem attractive to have more money at first, but you should remember that it is the bank’s money, and you’re just loaning it.
Check Your Credit Statements and Reports
The first thing your lender will look at is your credit report. So, logically, so should you. You should take a good and thorough look at your annual credit report. It will give you all the information you need about your credit account, a possible debt, and the history of its repayment. Obviously, if you are a first-time user, you won’t have much activity showing in your report. However, in the years to come, it will be a valuable asset in your estimation of how much you used and on what.
You should always come prepared when making a deal, and it’s no different when you decide on getting a credit card. It is certainly appealing to get “free” money, but you should always remember that it is not yours. That is why you should get into all the intricacies before you agree on something you’re not ready to give back.