Misusing your credit card can land you in serious financial trouble. To use your credit card the right way, it’s important to first understand the basics of credit cards. We’ve listed out 5 important things you need to know
You Need to Choose the Right Type of Card
There are a number of different types of credit cards that you can choose from. For instance, you can choose between a general-purpose credit card and a retail credit card. Similarly, you can opt to get a secured card or an unsecured card. Make sure to assess your requirements and credit history and pick a card that’s best for you.
It’s Important to Understand Interest Rates Charged for Credit Cards
Credit cards interest rates can go as low as 0 percent if you get a 0% APR balance transfer card, and as high as 30%. Credit card providers take factors like your income, credit score, current debts, payment history, credit inquiries, and the prevailing economic conditions to decide your interest rate. Having an excellent credit score can help you get a credit card with a competitive interest rate.
The Credit Card Contract Is Legally Binding
Be extremely careful about signing your credit card agreement, since the document is legally binding and you are essentially consenting to the issuer’s terms and conditions. Read through the fine print and look for things like the APR, grace period, fees charged, interest calculation method, and credit limit.
Avoid only Paying the Minimum Amount
When you charge expenses to your credit card, you are required to pay a certain minimum amount to be able to continue using your credit card without negative repercussions. However, whenever possible, you should try to clear the entire outstanding balance and not just pay the minimum, since any unpaid amount will attract a high-interest rate.
Compare Credit Cards
Commercial banks, online banks, credit unions, independent credit card companies, and retailers issue credit cards. Shortlisting and comparing cards from different credit card providers can help you pick one with the most competitive terms.
Once you are a cardholder, it’s important to know your rights and use your credit card wisely.