A credit card is a common necessity for many people. It is a medium of making lots of purchases and spending freely. However, a credit card can inflict a lot of damage, if not used carefully. It comes in handy, but it should be used intelligently. We have come out with some guidelines that you should follow before applying for a credit card.
Some pointers to consider before applying for a credit card
- How much you spend
Before applying for a credit card, consider your spending habits and preferences. What is important to you and how you will use your card is what matters. If you are a kind of person that will pay the credit card on time, then the interest rate on the card would not matter to you. You should opt for a card with a longer grace period and no annual fee. If you are the one who carries a balance, then go for a credit card that has a low introductory rate and interest rate. If you use your credit card for everything you buy, then choose a credit card with a big rewards program and extra credit limit. Try the American Express’ Blue Cash Everyday card in this regard. And, if you use your card just for emergencies, then select a card that has a low annual fee and interest rate.
- Interest rate
Interest rate is commonly referred to as the Annual Percentage Rate or APR. It is tied to a financial indicator like the prime rate. The APR can be a variable rate or a fixed rate. In a fixed rate card, the monthly interest rate is fixed, and in a variable one, the interest rate fluctuates. But sometimes, the fixed rate can also change depending on different factors like how you pay your card, going over the credit limit, or simply because the card issuer changes it.
- Credit limit
Credit limit is the amount that the credit card company allows you to lend. The credit limit is set according to your credit history. It can vary from a small amount to thousands of dollars. Before applying for a credit card, decide on a card that gives the credit limit according to your spending habits. Exceeding your credit limit can spoil your credit score. Moreover, you have to pay a penalty for it.
- Fees and fines
There are a lot of fines and penalties that credit issuers charge. These include transaction fees like cash advances and balance transfers, going beyond the credit limit, late bill payment, making a payment through phone, etc. Choose credit cards that have a reasonable fee and no additional charges for rewards programs.
Many credit card companies offer reward programs without any extra charges. Before applying for a credit card, look for a program that suits your expenses. It should be flexible in its perks like cash back, airline miles, etc. The points should be easy to earn and redeem, without any limitation. Also, check the expiry date of the program.
Lastly, go through all the terms and conditions before applying for a credit card. These smart suggestions will not only help you in making a wise decision, but will also save you from many hassles.