Monday, July 15

10 Things You Should Know Before Getting Your Credit Card

Ever since online shopping became a thing of delight, shopaholics received a multitude of payment options right at the fingertip. But within a span of time, shoppers started preferring online payments instead of ‘cash on delivery’.

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Even today, when you visit a mall to buy clothes, you will examine that maximum people are using credit cards. Using credit cards for online shopping has also become a perfect way to make shopping even more enjoyable than before. And getting the first-ever credit card is a massive milestone. It might turn out to be a huge adjustment if you do not understand the ten things before getting your first credit card.

  1. Going for a Security Deposit

You might have read dozens of blogs regarding why to get a credit card. But the safest answer to this is shopping. There are times when there is a demand for emergency shopping. Say, for example, your refrigerator has stopped working. The electrical professional has charged an amount similar to buying a new fridge.

In this case, getting your first credit card can be helpful. When you start with no credits, you can try your hands with a security deposit. A secured credit card can be best for people having no or damaged cards. 

  1. Cards for Beginners vs. ‘Best’ Cards with 0% interest

Now that you have decided to get your first credit card, you need to understand one thing. You are a newcomer here. And getting the first credit card does not qualify you for all the best ones out there. It’s no surprise that you cannot hold your excitement to get exciting offers like big sign-up rewards, long 0% interest periods, or rich perks.

Let’s be honest with the fact – these exciting choices are for experienced credit cardholders. For you, let’s just start with the smaller options. You can consider choosing products limited and geared towards cardholders with no history. Look for cards that charge less or no annual fees and simultaneously offer a decent number of rewards. A secured card, student credit card, or card with fair credits is genuine options you can consider.

Here’s one quick tip: You can avoid choosing the products licensed as cream-of-the-crop ones. These products require excellent CIBIL scores and histories to meet certain income needs and requirements.

  1. The First Credit Card Can Build or Ruin Your Credit

Another reason describing the significance of why get a credit card is it can boost your overall credit. But when you aren’t careful of it, it can even ruin your credit. It depends on how you use the card. Each month, the issuer will report your activity to the office compiling credit card reports. The information includes whether the payments get on time or not. 

To ensure the activities help you, it is better to be punctual about your payment timings. Pay either the full amount or exactly on the right time each month. Here’s one impactful rule of thumb: Keep the balance under 30% at least.

  1. See Fees and Rates before You Apply

The issuers need to disclose a couple of terms like fees and interest rates before applying for a credit card. It is better to see the rates of fees, such as the following: 

  • Annual fee: It’s the amount charged on an annual basis
  • APR or annual percentage rates: It’s the interest rate that you need to pay on the balance you carry from one month to the other
  • Foreign transaction fees: It’s the charge while making purchases in foreign countries
  • Late fees (can impose upon late payment): It’s the charge when you pay the money late (even one day late is countable)
  1. Paying More Than the Minimum is Justifiable

The credit card settlements display the minimum payment due to the issuer. Basically, you need to pay a small amount to keep a good reputation for the account. Before getting a credit card, you need to understand that paying more than the minimum is justifiable. Paying less only means paying much more than the actual amount later!

Paying less means you are not making any difference in the financial figure concerning the credit card debt. On top, if you continue making purchases, this leads to an uncontrolled balance in the card.

  1. Learning Ins & Outs about Credit Card Fees

Even when you are a beginner, you can avoid credit card fees. Here are the simple ways:

  • Choosing a secured credit card (or other starter cards) does not include annual fees: a plus point
  • When you pay timely, you do not have to consider late issues related to credit card fees
  • When you choose a foreign transaction card, you don’t have to pay irrelevant fees unless you make a purchase from a foreign land
  • The cash advances and balance transfers are the moot points (only when you don’t make the types of transactions)
  • Until and unless you go into the over-limit protection, issuers cannot charge you the over-limit fees
  1. An Insight into the Interest Rate

When there are so many types of credit cards, why get a credit card for beginners? To put it simply, there are many avoidable expenses you can consider looking for. And do you know you don’t have to pay a single penny of interest no matter how high the credit card APR is! Now the question is – how?

When you pay the credit card bill in full, you don’t have to worry about paying the interest. After paying the bill in full, there will be no interest in the new purchases until your next due date. In this manner, you can simply avoid the interest rates despite getting your first credit card.

  1. Late Payment Means Paying More

Once you miss a due date, it becomes way too expensive to pay the interest. But it certainly depends on how late you are paying the amount. For this reason, you might face any of the three – late fees, penalty ARPs, or credit damages.

You face late fees issues when the legal limits on the fees get adjusted annually. You face penalty APRs when you pay late, and it increases the interest rate. Generally, penalty APRs hardly get charged. On the contrary, paying the credit card fees on a day late would not hurt the credit. But when you pay 30 days late, it gets recorded as a late payment. This is how your credit damages.

  1. Getting Closer to the Limit Can Sink the Card

The available credit percentage that the cardholder can use is the credit utilization ratio. It’s a significant factor concerning the credit score. When the utilization ratio creeps up higher than before, the credit scores might take the beating.

With a lower credit utilization ratio, keeping the CIBIL score fairly becomes more seamless and simpler. You can keep the score in great shape by using less than or equal to 30% of the credit limit. The balance won’t be very close to the limit whenever you report the status of the account to your credit bureau.

  1. No, Dealing with Frauds Isn’t Difficult

Before getting a credit card, it is superior to understand things related to credit card frauds. If this fear has made get second thoughts about your decision, let’s not get worried before understanding. It’s not surprising to state that credit cards offer protection against fraud than debit cards.

When crooks get access to the information in a debit card, they might empty the bank account. Reporting the fraud and getting the money back will be time-consuming. And as a matter of fact, you might get strapped because of the cash. On the other, hand when the credit card information gets used fraudulently, these happen:

  • The Money Of The Credit Card Company Goes At Stake: If you think that it’s your money that is at stake, it’s not. In fact, it is the credit card company’s money! You will get ample time to dispute the fraudulent charges. You can even remove the charges from the outstanding balance too.
  • You’re Not The One Paying: The fact is that the Federal law minimizes the liability for the unauthorized card purchases. There are the zero-liability policies of the credit card networks.
  • Getting the replacement card becomes comparatively easy: Upon calling the issuer for alerting them regarding the fraud on the account, they will cancel the card & send a new one alongside the new number. There will be none who can make the transactions by using the old card number.

Summing up

Before getting a credit card, these are the things you should understand and remember. They can either build your credit or ruin it. Using a credit card definitely makes your shopping experience easier and secure. After all, the rewards you get are really beneficial. Nonetheless, the credit card can make it easy to start accumulating debts.

They are really powerful tools to create outstanding credit. However, when you misuse the card, it really becomes difficult to tackle the aftermath. Remember that you always need to use it carefully and wisely.

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