If you’re applying for your first credit card, there may be a lot you don’t know about it yet.
There can be many nuances to its usage and fine print agreements to credit cards that you should be aware of.
This guide is going to uncover some key things to know about having and using a credit card. Read on to learn more.
What Is a Credit Card?
A credit card is a small loan. In most cases, the loan is usually perceived as a short-term emergency loan. The loan may or may not incur interest, depending on when you choose to pay the balance. The loan, or credit, is accessed using a plastic card.
Why Get a Credit Card?
Now that you’ve established what a credit card is, why should you get one? A credit card is one of the best ways you can begin to build your credit score. A good score gives you an added advantage in the future when you want to secure a mortgage or other loans.
Assuming that you don’t misuse your card, you can be eligible for good credit in the future. Another great reason to get a credit card is that it can offer great rewards such as cashback or travel rewards.
Avoid Cash Advances
Did you know that cash advances on your credit card incur excessively high-interest rates? When you run out of money (credit) on your card, try to avoid the cash advance option. It seems like an easy fix for an immediate issue, but the repayment will be substantial.
Building a good credit score is essential, and incurring interest that will be impossible to pay off will only hurt your score.
Minimum Payment Is Costly
Most people believe that when they make a minimum payment on their credit card, they’re saving. That couldn’t be further from the truth. If you make your payments over time, you’ll pay more than if you pay it all off at once. It may look cheaper to pay that $30 monthly than to pay $300 at once, but this isn’t always the case.
When you carry a balance from month to month on your card, you are charged interest. Because of this, it is important to pay off as much as you can at the end of each billing cycle. Simply making the minimum payment does not guard you against interest charges.
Security
When getting a credit card, you want to be assured that your safety is guaranteed. No one wants to be in a situation where they’ll be forced to pay an amount they never used.
The card company should assure your security and the protocol should be spelled out in case you lose your card. Make sure to look over these terms and conditions carefully.
Is Your Card Secured or Unsecured?
Do you know if your card is a secured credit card or an unsecured one? The difference is that secured cards have collateral to back them up, and unsecured don’t have cash or collateral backup. With an unsecured card, you’ll likely get a low credit limit, but it depends on your earnings and credit score.
Conclusion
There is so much to know about your credit card. These were just some pointers to check whether you really know your credit card that well. Keep them in mind for future use.