In America, credit cards are prevailing as the number-one form of payment, over cash. In the average household there are four credit cards, which is necessary for some and a source of unending debt for others. While credit cards can work to ameliorate your credit, they can also substantiate its downfall. Before you apply for your own credit card, it would be wise that you glance over the article below.
A Perfect Fit
Credit cards do not come in one size. In fact, depending on your perspective, there can be over one-thousand different types. However, to keep matters simple, we are going to focus on the four most common variants, as defined by most banks:
Zero- or low-interest
If you are someone who can pay off your debt quickly, then then this is the card for you. The low rates can save you a bundle, but some cards only offer them for a limited amount of time before reverting back to the original percent of interest. Be sure you read the fine print before applying.
Would you like to get cash back or airline miles for paying your debt each month? Of course! Rewards cards are awesome for consumers who are frequent card users, and who are responsible with their payments. However, these cards often carry high interest rates, and might have annual fees that cancel their benefits. You should look carefully at the offer before you sign the line.
Have you had issues with credit cards in the past, but would like to give it another try? If you answered “yes” and are willing to put down a deposit, then you might have a chance at procuring a card that could repair your financial reputation. On the downside, that reputation comes at a price: interest rates tend to be high, and the down payment can be up to three-hundred dollars.
Similar to a rewards card, student cards can help pay for books and other emergency expenses while pursuing an education. Although they have the added benefit of bookstore discounts and cash back, they tend to have high interest rates due to students’ history of frivolous spending.
A Limited Grace
Credit cards usually have what are called “grace periods,” or an amount of time after the end of the month (or the designated billing period) during which you can pay back your debts without interest. If you pay back the complete amount over the course of this time, your credit will head in a positive direction. It is important that you are aware of your credit card’s grace period before you apply, as some credit companies do not offer one.
It is also a good idea to, before you apply for a credit card, to be aware of its prescribed limit. Every card is different, as each limit is applied with regards to how much you can pay. It is a method used by creditors to keep you, hopefully, out of debt. Your limit increases only if you meet the financial qualifications. For example, you could have gotten a new job that pays a higher salary, or you could have shown to your company that you are capable of paying your debts. In all, being cognizant of the amount your card can hold is essential for maintaining an adequate credit score.
A Necessary Option?
Why are you applying for a credit card? Let’s face it: while some people do it because they are responsible with money, others apply for the sole purpose of having another source of funding. If you are a part of the latter group, it would be the better option for you to wait and make sure that you are able to commit to a credit card in the long term. Credit cards are not free money and, for the reason of a maintaining a satisfactory credit score, they should not be treated as such.
If you are simply looking to build credit, or if you know that you can pay off your debts, a credit card might work in your favor. There are plenty of individuals who prefer sliding plastic over handling cash, which saves time at the bank and in the checkout line. When used correctly, your credit card can also keep you safe from theft and forgery, as long as you play a part in protecting your identity.
In all, you should make sure you are responsible and capable enough to pay your debts before you apply for a credit card. If you decide to read further than this short article, you will find both stories of success and failure in the credit world. All in all, a credit card is a smart investment for individuals who desire a more secure and more universal method of paying for the items they desire.