I have a few credit cards and they have helped me in times of struggle in the past. As for now, I use credit cards to gain rewards. No, I am not perfect. Over the years, I have paid my fair share of late fees and interest in order to have that credit on hand. However, I have learned that using credit cards is not really a bad thing, that is, if you are conscious about spending. I have always tried to limit my spending whether it be on credit or not. Maybe this has helped me in the past to constantly check my accounts to make sure I have not spent more than I can afford. As for the less conscious of minds, I have compiled a list of factors to take into account when searching for your very own card.
1. Interest -APR
The first factor, and possibly most important is the interest. Many companies will offer you an introductory interest rate. This will be anywhere from 10% to 0% APR, Annual Percentage Rate, in order to grab your initial attention, however, be careful, this isn’t worth your credit sometimes. You will notice after further reading, the introductory interest rate might increase from 0% to 29% and if you have a couple thousand dollars spent on the card this will add up. Just remember, even if you say, “Oh, I have 18 months to pay it off”, does not mean you will. Furthermore, if you do end up paying off your debt, what happens if you need to use it again, You’ll be charged that extra interest. This can push your payments to extremes and you may not be able to make all of your payments on time because you have spent more time paying off your credit card than you had initially hoped.
This brings me to my next factor of credit cards, the outstanding fees. You will most likely end up seeing this in the fine print, if you dare to pull out the magnifying glass and spend the time to do so, after all, it’s just a legal binding contract, not like it’s Apple’s Terms and Conditions. Some credit cards will offer special offers like, first late payment is forgiving, however after that, your introductory rate is over and your interest skyrockets. Another fee to watch out for is your annual fee. Some cards such as American Express are known for their annual fees. This can be anywhere from $75 to $100 depending on the card. Sure you get your first year free, but what happens after? Your fee is tacked onto your credit card and if your spending is near your limit, good luck trying to fight that over the limit fee. All in all, make sure you know what you are getting into. The worst thing you can do is agree to something that you have no clue about.
This brings me to my third factor, your rewards. many credit cards will offer bonus points for your agreement to sign with them, they are not always the best cards, but if you plan it right, you can reap the rewards and leave the credit in the dust. Most of the time, these credit rewards come with a price, meaning, you have to spend a certain amount of money within the first few months in order to receive the rewards. For example, going on a big trip soon? Well, if you have already saved the money, just open one of those reward cards, pay for your trip and pay off your balance in a week. This will ensure you get the bonus points and that you have paid off your debt. It is simply amazing when you already have the cash to spend, but want a little something extra for spending that money.
4. Credit Limit
Fourth on my list of credit card knowledge is your limit. Beware of this, If you reach it, your credit will not be forgiving. Some cards will not let you go over the limit, whereas other will charge you substantial fees for being even one penny over. Don’t let them charge you anything, if your limit is only $500, just dont spend more than four. I say this because if you have a late fee, it will be tacked onto your initial amount and if the fee causes you to go over, guess what, you are responsible for more fees.
5. Your Credit
This brings me to my last factor. Knowing your credit. Do some homework, it is smart to know what credit cards you are eligible for before going to credicards.com and signing up for the first one you see. Many companies offer online only promotions, whereas others will offer special rates when you apply within their bank. Take into account your credit card and don’t settle for what the first couple companies are willing to give you. These are usually soft inquiries on your credit and will result in a few dropped points, nothing to be alarmed of. when considering you may be signing up for a bad card.Also, I must mention CreditKarma– this website has brought me joy ever since its inception to the webspace credit reports. They are pretty reliable and will give you great tips on your credit. Also, it’s free! so check it out.