You are probably constantly flooded with credit card offers. You can even receive more in the mail every day.
While it can be tempting to register for any card that is offered to you, there are a few things to consider before applying for a credit card.
Do your research on the credit card company, as well as a specific card account features, benefits and all fees. You also need to be sure that you are financially willing to take responsibility for a credit card.
Credit cards can be a powerful financial tool if handled properly. However, many people end up making mistakes with their credit cards and with credit card debt, so ask yourself the following before signing on the dotted line.
In short, there is only one correct answer to this – you are considering opening a credit card to build credit. If so, you need to make sure that you act responsibly with your card. You should pay off the balance in full each month, and your credit card is not safe for things you cannot afford otherwise.
This means that your budget will stay on. Remember, it may be easy to put new pairs of shoes on your shiny new credit card, but you will eventually pay back that money, plus interest.
Many cards will entice you with an introductory interest rate, or April, of zero percent. While this may seem like a great deal at the time, be sure that you can withdraw your funds during the promotional period. If not, you will be forced to pay on your card with the new interest rate, which will likely be higher. It can even jump 15-20 percent.
Even if a card does offer a promotional rate, you should research the interest rate after the promotional period ends. Shop around and look for the lowest interest rate you qualify for. It will make you money in the long run.
There are so many credit cards available that you shouldn’t pay an annual fee should you use the credit card. Many cards try to offer you cash back or other rewards as long as you pay an annual fee with the card. But don’t be fooled. There are rewards cards that don’t charge an annual fee, so keep an eye out.
When you pay the entire balance at the end of each month, you should carefully look at the rewards you earn with your credit card. Generally, the best deals are for the cash back cards. These cards give you a percentage of your expenses. You can cash in these rewards in for a higher amount on a gift card.
Travel rewards cards are other great options. You can use these cards to collect points or use miles a month to travel, which can save you money.
You should also research and understand the penalties or fees associated with your card. For example, your credit card company can raise your interest for a late payment – in addition to a late fee. Your card balance surpasses it which will also result in a dent in your interest rate.
Ideally, you should only have one or two credit cards in total, including memory credit cards. You don’t need more than that. It is too easy to find yourself completely overwhelmed with debt if you have more than one credit card.
The safest practice is to only have a credit card that you pay off in full each month, especially if you just started using credit cards. If you feel you need an additional card, you should take out a prepaid credit card that does not charge a monthly fee or expires.