Credit cards can be a powerful weapon for you if you can use it wisely but in case you fail it can be a boomerang for you. There are some very important things regarding credit and you must know them before you choose to use this.
1. Types of Credit Cards
There are two types of credit cards, secured and unsecured. Secured credits are issued against certain amount of deposit while unsecured cards are issued on the basis of credit history and no deposit is needed. The latter is the most common credit card form found in the market. In Bangladesh you need to be a registered tax payer along with a satisfactory level of monthly income holder either in the form of a permanent salaried employee or a self employed professional. You also need to have a clean and rich credit history i.e. you cannot be a loan defaulter.
2. How many cards can you have
There is no rule of thumb regarding the number of credit cards you can have. It is often found that some smart people use more than 7 or 8 cards. However, if you are not smart to handle so many cards then for sure you are in a trouble. It is better to obtain two cards because in case you are in a financial crisis you can use the second card to pay off the first card’s bill.
3. Rate of interest
Your credit card interest can range from 0 to 27%. If you pay off your bill in time you will require to pay no interest, but if you fail then your card company can charge you up to 27%. Apart from that there will be penalty and late payment fees.
4. Compare cards
Before you select a bank or credit company to have a credit card you must compare them online and gather some necessary information so that you get the best rate and the most suitable card for you to use.
5. Read the agreement
You should not blindly sign the documents while purchasing a credit card because once you sign the agreement you are bound to accept all the conditions set by the company. Never forget to take note of the following points:
• Credit line/limit. It is the amount of credit you can avail. You can have separate limits for cash withdrawal and for issuance of account payee cheques.
• Annual percentage rate (APR). The rate at which your company will charge you if you carry on your outstanding balance to next billing cycle. There may be different rates for cash withdrawal and transfer of fund.
• Interest calculation method. It is often reported that credit card interest rates are calculated in a different way. Actually, they calculate interest for everyday and charge them on your outstanding balance. Hence, the longer you wait the higher you have to pay.
• Fixed or variable rate. The rate of interest can be a fixed one or it may vary according to the market condition.
• Grace period. It is normally 15 days time frame between your last date of payment and the date on which the interest will be charged.
• Fees. Common fees include annual fee, late payment fee, balance transfer fee, cash withdrawal fee etc. If you find any unusual fee, you had better not purchase cards from that company.
6. Bill payment
Your bill payment can be made either in full or by paying off the minimum balances. If you pay the minimum balance then you agree to carry on the outstanding balance and accept the interest charges.
7. Your protection
It is your legal right to have fair treatment. If you find any hidden charges and confusing terms, you can certainly ask for compensation by filing a suite.
However, it is wise to choose a card that has low annual fees. You are advised not to carry the balances to next month and always pay your bills in full on time.
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