Before You Before You Get a Credit Card
There is no doubt that you will be inundated with credit card offers. You may receive several in the mail every single day. It can be tempting to sign up for every card that you are offered, but this would be a mistake. You should consider several things before filling out those credit card forms. You need to be sure that you are financially ready to take on the responsibility of a credit card. Credit cards are not really bad, if they are handled correctly.
They can be a useful tool, but too many people make mistakes with their credit cards. Before you sign up for a card, make sure you are ready to handle it correctly.
Why Are You Considering Getting a Credit Card?
If you are getting a credit card in order to build credit, you need to make sure that you act responsibly with your card. You should pay off the balance in full each month. This means that you continue to stick to your budget. If you are getting the card so that you can purchase things that you just do not have the money for right now, then you should not even apply. You will have to pay for everything eventually and even though you may save ten dollars by purchasing those shoes now, if you do not pay it off immediately you may pay much more than that in interest.
- Try to limit the number of credit cards that you have.
- If you are getting a new card because another one is maxed out, you should not get the new credit card. Instead set up a budget and work on paying it off.
Look at the Interest Rate
Many cards will lure you with the introductory rate of zero percent interest. This is to encourage you to build a balance that you will not be able to pay off during the promotional time. Your interest rate may jump up to fifteen or twenty percent after the introductory period is over.
If you are offered an interest rate as high as fifteen percent you should keep looking for another card.
- In addition to the introductory rate be sure to look at the regular rate that you will be charged and choose a card with a lower rate.
- The best way to qualify for lower rates is to have a higher credit score, which means you do not utilize too much of your credit and you make your payments on time.
Look for a Card with No Annual Fee
There are so many credit cards available that you should not pay an annual fee in conjunction with your card. Many cards try to offer you cash back or other rewards as long as you pay an annual fee with the card. There are rewards cards that do not charge an annual fee, so you should keep looking.
- You can look online for a card without an annual fee and apply there. A good place to start would be with your current bank or credit union.
Consider the Rewards Offered
If you are going to pay the entire balance at the end of every month, you should look carefully at the rewards that you can earn by using your credit card. Generally, the best deals are on the cash back cards. These cards return a percentage of your spending to you. You may be able to cash these rewards in for a higher amount on a gift card.
- Take the time to read reviews about the different rewards programs.Sometimes the restrictions on the rewards can make it difficult to use them.
Look at the Penalties
It is important to understand the penalties and fees that are associated with your card. The bank can raise your interest rates for one late payment. Additionally you will be charged a late fee. If you exceed your balance then you will be charge an overbalance fee and your interest rates will be raised as well. These interest rates can go as high as thirty percent.
- Understanding how the card works is the best way to make the most of the card without accruing any penalties or additional interest.
- If one care has unreasonably high penalties, you might be better off choosing another card.
Limit the Number of Cards You Have
Ideally you should only have one or two credit cards total.
This includes store credit cards. You do not need more than this. It is too easy to find yourself completely overwhelmed with debt if you have more than one credit card. The safest practice is to have just one credit card that you pay off entirely each month. If you feel like you need an additional card, consider taking out a prepaid credit card that does not charge a monthly fee or expire is it is inactive.
- Choose just one or two credit cards that you use. This can stop you from accruing too much credit card debt and help to keep your available credit in balance.
- Avoid closing your oldest credit card, since this will shorten he length of your credit history and can bring your credit score down.