We all know credit cards can be so convenient. Not only will this help you avoid using cash, but it can also help you solve temporary problems with the money crisis and mention any additional benefits such as reward points or partner offers that result from it.
Do you want to get a new credit card for yourself? And it is difficult to decide which credit card might be beneficial because there are so many cards to choose from in the market.
Here are the 5 things you need to know before getting a credit card as it is important to choose wisely.
As the name suggests, a credit card is a tool that allows you to spend money without actually owning the amount. In addition, a credit card is an unsecured instrument, which means you don’t have to pledge an asset to get a credit card. For these reasons, the interest on a credit card is quite high. It can be between 24 and 42% per year.
Well, you shouldn’t have to worry about the interest rate as long as you regularly repay the amount at the end of each billing cycle. However, there can be intentional or unintentional slips. So make sure you choose a card with an interest rate that suits your pocket.
Minimum payment required every month
Your credit card issuer offers you two payment options at the end of each billing cycle. One is the minimum amount due and the other is the total amount due. The Minimum Amount Due is the lowest amount that must be paid each month to avoid late payment fees.
This minimum monthly payment is typically 5% of your expenses during this billing cycle. Don’t be too excited! You should also be aware that the remainder of the unpaid amount and the amount freshly billed will be charged with interest.
Benefits that come with the card
A credit card is a complete package with convenience, benefits such as reward points, partner offers and much more.
Before applying for a credit card, check your spending pattern. Do you shop online for all your needs? A co-branded card with Amazon or Flipkart can prove beneficial. Or do you think a cashback card is better because you get benefits back on your card? Do that. Or, choose a card from your banker that is available at lower interest rates.
The bottom line – a card you choose should match your spending.
Annual fee on the card
A credit card is not always free! While some cards have a membership fee, others may be charged an annual fee. Or some drop these fees if they spend a minimum amount in a year. It’s a great way to research the annual fee and joining fee and see if they’re worth the benefits you’re getting.
Overusing your card can affect your creditworthiness
A credit card has an upper spending limit, also known as a credit limit. It’s based on your income, creditworthiness, etc. You may think that if you can afford to pay it back, you could spend as much as you want.
While you will have to repay the full amount each month, it is also important to keep card usage in check. Overusing your credit card can adversely affect your credit score as you are considered a credit hungry person. It’s good to keep your spending between 30-50% of your credit limit.
Now that you know what to look for before getting a credit card, get one. But make sure that you are using it responsibly, paying your fees, and building your credit score.
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