Credit cards may be an excellent tool for shoppers and come in various forms to suit your needs. Whether you need a credit card that lets you pay off your debts, enables you to get a good credit score, or offers you rewards on your spending, there’s always a credit card perfect for you. However, before getting any credit card, make sure to know some of the basics first.
What to Know about Credit Cards
Generally, credit cards are small plastic cards, which allow you to borrow money from financial providers. If you borrow funds for a certain period of time, you’ll need to pay fees for the privilege – these fees are referred to as interest.
You can use credit cards like the ones listed in Wealth Living Today if you want a convenient and secure way to pay. They’re also advantageous when you’re aiming to build or improve your credit score, which is a 3-digit number that shows how good you are at repaying debts.
Just take note that credit cards aren’t free money and you’re always expected to pay for whatever you borrow. There’s also a maximum you can borrow at any given time.
How Do Credit Cards Work?
Credit cards allow you to spend money on credit. It’s more like having loans for the total amount you’ve spent using the card. You may spend up to pre-set credit limits, which could be several hundreds or thousands of dollars.
Once you pay off the bill completely every month, you won’t need to pay interest on what you’ve borrowed. But, if you make cash withdrawals, the interest is typically charged daily right from the day you got the money from your credit card.
It’s one of the reasons why you must avoid taking cash out using credit cards if you don’t want to incur high interest rates. More often than not, the interest rates for cash withdrawals are higher than for the purchases.
If you haven’t paid off any outstanding balance in full, interest will also be charged. Moreover, if you’ve purchased something at the first week of the month, you’ll be charged with an entire month’s interest.
How to Use Credit Cards Properly
If you don’t use credit cards responsibly, they can be a bit dangerous. However, if you’re smart with your credit card usage, you’ll be able to enjoy a lot of rewards and benefits as well as boost your credit score at the same time.
Below are some of the ways on how you can use your credit card wisely:
- Check for Any Worthwhile Rewards – A major advantage of using credit cards is that you can enjoy a variety of credit card rewards that your issuer offers. Before signing up with any credit card provider, see to it that the rewards are both useful and accessible to you.
- Pay in Full – You must pay your full statement balance monthly. The moment you start to carry a balance, you’ll start accruing the interest charges automatically, which may increase daily until you find a way to get rid of your debt completely.
- Spend Below Your Credit Card Limit – While the credit utilization ratio of 30% or less may help improve your credit score, spending over the 30% threshold may reduce your credit score. It means that if you have some credit cards with a limit of USD$10,000, you must not spend more than USD$3,000 in charges at one time.
- Review Your Statement – See to it that all charges on your statement are legit. If you ever find any that aren’t, make sure to notify your issuer immediately. Even small charges you don’t recognize can be alarming. Oftentimes, thieves make small purchases to test a stolen credit card number and charge more if the test is successful.
- Know Your Benefits – A credit card doesn’t only serve as an interest-free, short-term loan of sorts, but they also reward users for making some purchases. Many cards provide extra benefits like coverage or built-in purchase protection for the stolen items.
How to Get a Credit Card
You can apply for any credit card online, either through a comparison website or via the provider’s official website. There are also other providers who can let you apply in branches or via phone. The only thing you need to provide is your personal information, which may include your income and your bank account information. To know if you’re eligible for a credit card, you can take advantage of the provider’s eligibility checker before you apply.
Credit cards can be beneficial in many ways, but only if you know how to use it wisely and properly. Be sure to make payments on time and in full as it shows that you can use credit cards responsibly, which will have a positive effect on your credit scores in the long run.
Remember that a good credit score may help you get approved for other cards including the ones that offer lower interest rates, more enticing rewards, or perks. You can also be eligible for high credit limits for your cards. With high credit scores, you may also be offered with better terms and lower rates for some kinds of loans such as home mortgages, auto loans, or personal loans.