Before applying for a credit card, it is imperative that you know everything about it. By doing so, you will be able to use the credit card correctly and avoid the risk of putting yourself into debts that you did not plan for.
While paying with plastic has become the standard nowadays, you have to give much thought to the credit cards you apply for and the impact that they will have on your finances. Think about the interest rates, perks, reward programs, and issues associated with credit card debt when applying for the credit card.
7 Things to Know About Credit Cards
1. Not All Credit Cards are Created Equal
The first thing you need to know when applying for a credit card is not all of them are created equal. You will come across many choices with a wide range of fees, interest rates, rewards, perks as well as credit limits.
It is a good idea to shop around before settling for a particular credit card option. A good place to start will be to check out top credit card picks from sites like cardratings.com. They can help you figure out which is the right card for your needs easily.
2. Some Have Annual Fees
Another important thing to keep in mind when looking for the right credit card is that there are some that come with annual fees. Even though these fees may vary from company to company and card to card, it is just important to check and be sure of what you are getting into.
The annual fee for the credit cards is usually not a terrible expense in most cases, but it is something that can sneak up on you if you are not too careful. If you do not plan on using the credit card much, looking for an option without an annual fee will be a good idea.
3. There is no Limit to the Number of Credit Cards You Can Have
According to a research that was done by myFICO.com, the average consumer has a total of nine credit cards.
There is no such thing as a perfect number of credit cards an individual should have. Every consumer can have a number of general purpose credit cards that suit most of their needs.
When applying for a retail card, make sure that it is for a store that you visit most often. Most retail cards charge higher interest rates compared to general purpose cards, so it will be a good idea to make sure that the retail card you are applying for provides an incentive for using it.
4. Different Credit Cards Have Different Interest Rates
Credit card interest rates can range from as low as zero percent to as high as thirty percent depending on the company or type of credit card.
There various factors that creditors use to set your annual percentage rate, including your credit score, assets, income, credit inquiries, current load debt, economic conditions and payment history.
In order to get the lowest rate, you need to have a positive and proven credit history.
5. The Contract is Binding
Some people usually make the mistake of signing the contract pertaining to their credit card without even reading the fine print.
What you need to understand is that the contract is binding, and it is imperative that you read the agreement very carefully before you go ahead to sign. The moment you place your signature on the contract, you form a legal contract as well as consent to the terms that have been set by the issuer.
The terms cover things such as the credit line/limit, interest calculation method, annual percentage rate, grace period and fees.
6. You Can Either Pay in Full or Not
Since credit cards have a revolving balance option, it is not mandatory to pay the loan in full. But you need to at least pay the minimum requested amount to be able to carry the remainder forward to the next month. Interest will be added to your balance.
However, you have to try as much as possible to avoid paying just the minimum amount because the creditor may see you to be a high risk cardholder and increase your interest rate.
7. You Have Rights
When you apply for a credit card, you should know that it is your legal right to be treated fairly by the issuer. In case you have any problems with your bill, you have the right to dispute and correct the mistakes.
There is no secret to using credit cards wisely. When you become a cardholder, just make sure that you pay on time and refrain from carrying the debt forward every month.
If you get a card that has a good rewards program, you can enjoy a lot of benefits by using it.