Credit cards are great to have if you can use them in an appropriate way. If you can’t then you will never be able to figure out how much harm it can do to you. Follow the issues below before you choose to have a credit card:
1. The way you spend
You can either use your credit card for emergencies or you can use it for every time you go and purchase any item. You can pay the whole bill every month or you can pay the minimum amount and carry on the balance to the next month.
• In case you decide to pay all your bills every month, you should not worry about the interest rates. You should only choose the one that has no annual fees and has a longer billing cycle.
• In case you want to carry a balance, you must search for the lowest rate of interest.
• When the card is for you to buy anything you like, you must find the one that will give you the maximum reward point for using it.
• If you want to use your card only in case of an emergency, just get one that has the lowest rate of interest and the lowest annual fees with no frills.
2. The interest rate
Credit cards have two types of interest rate and they are fixed or variable APR (annual percentage rate). The variable rate has a prime rate plus that variable rate. As for the fixed interest rate, even though the rate is fixed, it may change anytime if the company so decides. Companies will also charge you if you fail to pay on time or pay less than your outstanding amount.
3. Credit limit
Your limit is how much you can spend using your credit card. Your credit history will let the company decide your limit. It is wiser to stay well within the credit limit and never go close to your limit since it will hurt your credit score and harm your reputation.
4. Fees and penalties
You can’t even imagine in how many ways the credit card can cost you. It can involve fees for cash advances, fees for increasing the credit limit, fees for payment through a phone call and so on and so forth. Penalties are also there if you are late to pay the bills or you cross the limit. They allow you to use your card and send you a shocking bill the next month.
You must find the card with reasonable fees. Look for one that entails no fees for transactions and no interest payments for the first 12 months. You must avoid reward programs that may involve hidden costs.
5. Balance computation method
You must consider the way in which the card company calculates the financial charges in case you decide to carry a balance. Average daily balance for a billing cycle is the most common method. However, some companies use two billing cycle method and you just need to avoid them.
If you are interested in reward programs because you will be using the card very often then just choose the one that will not charge anything extra for the rewards. You should also consider using the reward points for cash or travel or for redeeming the annual fees.
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