Taking out a credit card? Everything you should know about it

everything-you-know-before-taking-out-credit-card

Are you aware of how important it is to have your own credit cards? The credit card has its own importance that all should know. It is a tool that can give you the freedom to meet your requirements. But at the same time, a credit card can be fatal to your financial health if you don’t use it properly. Thus, you should follow some safety measures while taking out a credit card.

Things you should know before getting a credit card

Before getting a new credit card, you should gather some knowledge on it. It will help you to understand which credit card will be best for you and how you can manage it. Here’s what to know before getting a credit card:

  • Difference between a secured and an unsecured credit card

If you want to build a credit history but not sure whether or not you can afford the credit card bill every month, then go for a secured credit card. Don’t welcome the financial burden for every month if you are financially unable to manage it.

By using a secured credit card, you’ll come to know how to manage traditional credit cards efficiently. You will certainly get all the convenience and privilege just like an unsecured credit card. The only difference is you need to deposit a certain amount to use a secured credit card. The cash works as a collateral to secure the credit card company against any loss. So, if you are not confident enough about managing a traditional credit card, then take out a secured credit card.

  • Know the grace period

The credit card companies provide you with a grace period within which you need to pay off the credit card balance. Try to repay the balance within the grace period so that you’re not charged a higher interest rate on the remaining balance.

  • Understand how to take out the right card

Before buying a credit card, you should analyze your spending. If you often buy gas for your vehicle and spend a lot on it, then go for a gas credit card to get privileges. If you shop or dine out often, then grab a credit card that gives a discount on these purchases.

Also, you have to take out a credit card that charges a lower annual fee as well. Remember, credit card features vary among various cards and credit card companies. Thus, you should be careful while taking out a new credit card. Ask about the privileges that you can get by taking out the credit card.

  • Inquire about the customer care service

Customer care service is what most of you do not take into consideration unless you face any problem. Make it a point to buy your credit card from a company who provides you with a 24-hour toll-free service so that you may contact them once the need arises.

  • You need to pay before the due date

All credit cards have a due date by which you need to pay off the credit card balance to avoid interest charge on the remaining balance. Make sure you repay the outstanding balance before the due date to avoid penalty charges.

What to consider before getting a credit card

Remember, getting a credit card is not enough. You should maintain it properly. If you fail to manage a credit card properly, you may fall into a credit card debt trap. Thus, you should know what to do before getting a credit card.

  • Understand your affordability

Remember, you should repay the credit card bill in full and within the stipulated time. So, before getting a credit card, at first, make sure you can afford the credit card bill. Don’t think credit cards are free money and you don’t need to repay the bills. So, analyze your income and total monthly expenses first. See whether or not you can manage credit card bills without any difficulties. If your current income and score don’t permit you to get a normal credit card, then go for a secured credit card. It does the same job as a credit card. The difference is, you need to deposit a certain amount beforehand into the account to use the credit. The deposited amount becomes the credit limit of your card.

If you think that you can manage a secured credit card easily, then you can think about taking out a normal credit card.

  • Get a credit card with reasonable interest rates

Try to find the credit cards that offer you reasonable interest rates. For example, the worst credit cards are the ones that charge the highest minimum Annual Percentage Rate or APR and high initial fees as well. As per the federal rule, subprime credit cards cannot charge you more than 25% of the initial credit as the fees.

  • Shop around to get the best credit card

You will have to shop around to get the best credit cards. You will have to do some online research for this. Don’t simply get a credit card from the company who had mailed you an offer. Before taking out a credit card, devote a good amount of time for the research work. Compare the offers of different credit card companies.

  • Read the fine print

It is important that you read the fine print of the credit card before you purchase one.  There can be hidden terms and conditions, which you should carefully read so that you are able to get the best offer as per your affordability.

  • Develop an understanding of the features of credit cards

You will have to develop an understanding of the credit cards. This is important because you will have to determine which kind of credit card will be the best for you, which are the ones for which you may qualify, and how you are going to use the card you are going to apply for. You will be able to get the best offers with credit cards only if you have a very good credit score, above 750. In addition to the above, after you get a credit card, you will have to make the on-time payments to maintain low debt levels. In addition, also keep a low usage of credit cards so that you do not incur huge debts.

Important questions to ask before getting a credit card

Before getting a new credit card, make sure you know about some important things about a credit card. You should always ask the credit card issuer about these following questions.

  1. What is the Annual Percentage Rate (APR) of the card?
  2. What will be the minimum repayment of the particular card?
  3. What is the annual fee of the card?
  4. What will be the penalty if you miss a payment?
  5. How can you earn reward points by using the card?
  6. Is there cash back policy in the card?

Easy tips to follow while using a credit card

Credit cards are the important financial tools; by using the credit cards responsibly, you can boost your credit rating. But a single mistake can create a financial problem. Thus, you need to be mentally prepared about how to use a credit card responsibly.

  • Remember, you shouldn’t skip a credit card payment. If you miss a payment, you will be charged a late payment penalty. So, before getting a credit card, make sure you have enough income.
  • Use credit cards when you are in need. Don’t use a credit card for purchasing daily necessities. If you use your credit card for daily purchases, then make sure you repay the entire bill on time.
  • Try to stay/spend within your credit limit. If possible keep the credit utilization under 30% of your total credit limit.
  • Don’t allow other people to use your credit card. The credit card company will not accept any excuse.
  • Don’t just take out a card to get the reward points. Analyze your need before taking out a credit card.
  • Pay the bill in full every month. Even making the minimum payment is not good.
  • If your income is not good, then don’t take out a credit card. Make sure you can afford the bill before taking out a credit card.

Lastly, don’t think that without a credit card your life is incomplete. As I said before that, taking out a credit card is not enough; you have managed it properly. Thus, if you think your income is not sufficient, then wait for some time and increase your income so that you can manage the bill of the credit card.

If you want to build a credit history or your credit score is not good, then consider a secured credit card. It is the safest way to build a credit history.