Are you wondering how to get a credit card to make your shopping experience more convenient and secure? Hang on for a moment. You have plenty of information to acquire about that powerful credit instrument before you use it. Credit cards are a fantastic tool for financing your needs and building creditworthiness, but they come with significant risks. However, they can benefit you in numerous ways if you know their basics and use them wisely.
Here are ten essential things to know before you apply for a new credit card:
Choosing the right credit card
While many banks bombard customers with multiple credit card options, one must be very careful in choosing a card based on different fees, interest rates, credit limits, grace periods, etc.
It is the most significant indicator of how well a person has handled debt. The higher the number, the better — a score of 750 and above is desirable to apply for a new credit card. Managing your payments timely and maintaining a low credit utilization rate improves the credit score drastically.
One of the parameters which help the issuer set the credit limit on the card is the user’s income. It also allows the issuer to check the bill payment capacity and could affect credit history.
Fixing the credit limit
Initially, when you get a credit card, a low credit limit will be provided to minimize the risk of overspending. And once you get used to managing it, the issuer will give you the option to increase the credit limit.
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Knowing the interest rates
As long as you pay your credit card bill in full monthly, no interest is levied on card usage on your transactions. Therefore, always pay the bill in full to completely evade any annual percentage rate (APR) which could empty your pocket.
Keep a check on all fees
There are several fees to check while availing of a credit card, such as joining fee, annual fee, finance charges, transfer fee, cash advance charges, foreign transaction fees, over-limit fees, and more.
Paying late bills could increase your interest charges as well as damage your credit history, depending on how late your payment is. Hence, make a note of the monthly due date to always be on time. Set up auto-debit to forget tracking the billing cycle and late payment dues.
Understanding the credit utilization ratio
It can be defined as the percentage of available credit limit to use. To avoid any damage to your credit health, you should keep a check on your expenditure irrespective of your credit limit.
Dealing with card fraud
Even though credit cards offer you better protection compared to debit cards, staying alert on fraudulent calls and informing the issuer as soon as the card is stolen or misplaced does minimize the loss.
Availing credit card offers
One should be aware of the current offers on their credit cards while shopping, paying bills, making reservations, planning holidays, etc. These offers might fetch you great discounts and cash-backs along the way.
Carefully read the terms and conditions and benefits available on cards before applying for one. Understand your lifestyle patterns and other needs to make an informed choice.