A credit card can be a convenient way to purchase items at the moment, but that convenience comes at a price. Most people don't understand how their credit card works. Thus, end up taking on more debt than they expected. This article will outline some of the things you need to know before getting your first credit card and why it's important to read through the terms and conditions thoroughly before signing anything.
When you're deciding on a card, make sure you know the difference between a "store card," "rewards credit card," and "corporate credit card." Each type of card can be more expensive than the others depending on what suits your needs best.
Depending on your needs and status (are you employed, do you have a security deposit, etc.), the best type of credit card for you may be a rewards card. These allow you to earn points on each purchase that can be redeemed for things like gift cards, magazine subscriptions, and travel. These credit card offers are usually targeted at individuals with better credit scores. This is because the company is taking a bigger risk in extending your credit. Reward credit cards typically offer a higher credit limit than other types of cards and tend to have lower interest rates as well. But, there are also cashback, free travel, bonus deals.
When you apply for a card, consider your credit history. If you've made all payments on time and keep the cards you currently have paid off, then great! You're likely to be approved for another one. If not, understand that your chances of approval are lower than someone with better credit. For example, if you have had an excessive amount of credit inquiries or recently had a bankruptcy, then your chances of approval are lower. With that said, there is no need to be discouraged if you fall into the latter category! It's in your best interest to pay off any balances on other cards in full before applying for another one. This can increase your chances of being approved.
Make sure you check your credit score before applying to see if any errors could be hurting it. If necessary, rectify those mistakes as soon as possible. Lenders consider those when deciding whether or not to approve a loan for you. You can do this by getting a free copy of your credit report once per year. You can do this through the major credit reporting agencies online or by phone.
While all of this may seem like a lot to think about before getting your first credit card, consider what your goals are for using one. Whether it's to build your credit score or to simplify your life by making purchases from one account. Are you going to use it for everyday expenses or pay it off in full each month? These are all things you'll need to consider before applying.
And when comparing cards, be sure they have similar rates and fees. This allows you to make an informed decision when deciding which one will work best for your needs.
Because of the convenience factor, it's easy to spend more than you can afford on a credit card. But there are advantages and disadvantages to using them. The biggest advantage is that if it gets stolen or misplaced, your issuer will replace the lost card free of charge. Also, by law, they must provide you with your credit score for free once per year.
The downside to having a card is that interest rates are high and late fees add up quickly. If you don't pay off your balance each month, it can be very easy to fall into the trap of debt. This is because of how much interest charges add up while you're paying down your bill. Remember that if that happens, you'll be dealing with the consequences for a long time. Thus, will have to put off big purchases or vacations, for example.
While credit cards can be a great tool for convenience, they come with high-interest rates and late fees. These make it easy to get in over your head. If you're going to use one, consider what your goals are for using the card. Whether it's to pay down debt or build up your credit score. Once you know what type of card is best suited for those needs, compare different offers from various companies. This will allow you to find the right balance between rewards and terms.