Why are you thinking about getting a credit card?
Before you apply for a credit card, you should consider the following:
1. Why are you thinking about getting a credit card?
If you are considering opening a credit card to build your credit, you need to ensure that you will act responsibly with your card. You should pay off the balance in full every month, and avoid using your credit card to buy things you cannot afford financially.
2. Keep track of the number of cards you have
If you are thinking about getting a new credit card because your current card is maxed out, you should not get a new credit card. Instead, set up a budget and start paying down your balance. You can try to get a new credit card to take advantage of benefits not available with your old card, or try to achieve a lower credit utilization rate during the billing cycle.
Look at the interest rate
Many cards may lure you in with a promotional interest rate of 0%. While this may seem like a good deal at the moment, you must ensure that you can pay off the balance during the promotional period. If you cannot, you will incur new interest on your card, which is likely to be higher. It could be as much as 25% or more.
Even if the card offers a promotional rate, make sure to look for the interest rate after the promotional period ends. Shop around and find the lowest interest rate you can get. This will save you money in the long run.
Look for a card with no annual fee
There are many credit cards available that do not require you to pay an annual fee to use your credit card. Many cards may try to entice you with cash back or other rewards while imposing an annual fee on the card. But don’t let yourself be fooled. There are rewards cards that do not charge an annual fee, so keep searching.
Take advantage of the rewards offered
If you will pay off your balance in full at the end of each month, you should carefully examine the rewards you can receive by using your credit card. Generally, the best deals are on cash-back cards. These cards return a percentage of your spending back to you. You might be able to redeem these rewards for a higher amount on a gift card.
Travel rewards cards are good options as well. These cards can earn you points or miles each month that can be used for travel, allowing you to save money.
Look at the penalties
You should also research and understand the penalties or fees associated with your card. For instance, a credit card company can raise your interest rate due to a single late payment, in addition to a late fee. Exceeding your credit limit will also lead to an increase in your interest rate.
Keep track of the number of cards you have
Ideally, you should only have one or two credit cards, including store credit cards. You don’t need more than that. It’s very easy to find yourself trapped in debt if you have more than one credit card.
The best practice is to have only one credit card that you pay off in full each month, especially if you are just starting to use credit cards. If you feel you need an additional card, consider getting a prepaid credit card that does not charge monthly fees or expire.
These are some considerations to keep in mind when choosing a credit card. Remember that credit cards can be a powerful financial tool if handled correctly. So, do the necessary research and choose the card that best fits your needs and financial situation.
Source:
https://www.thebalancemoney.com/choosing-a-credit-card-2385751
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