Most of us will say that having a credit card makes a person feel more independent than other things.
In reality, you need to be very careful when you apply for a credit card. It's a complicated web of fees, charges, and interest rates, not to mention hidden clauses and terms that are not only illegal but also bad for your finances and can put you in a lot of debt.
Only apply for a credit card if you know you will be able to use it wisely in the near future. But first, you need a crash course in credit card interest rates for people who don't know much about them before you run out and get your card.
I've learned that interest rates aren't the same for everyone. But most of the time, a person's credit history is used to figure out what his interest rate will be. If you don't have a history of bad credit, you might be able to get a loan with a low interest rate. If you didn't do that, you would have to work hard to improve your credit.
This can be done in a hard way by accepting the compromised interest rate that the bank will give you, or in an easier way by choosing a plan with a lower credit limit so that the interest rate matches. There is also the prepaid credit card option. But it's hard to get this way of rebuilding credit, and it costs even more in interest.
There are, in fact, credit cards with low interest rates or even plans with no interest at all. However, as expected, there is a catch: this low interest may not be good for more than a certain amount of time, usually between six months and a year. After this period of low interest rates is over, the interest rates will go up. For a monthly or annual fee, borrowers can sign up for service alerts that let them know when their low-interest period is about to end.
Most of the time, though, these are just tricks. They are meant to work only for a short time.
Some credit cards can also be used at an ATM to get cash up to the credit limit, but interest is usually charged from the date of the withdrawal, not from the date of the monthly bill. This means that the issuer gets more money back from the transaction than usual in the form of interest.
Keep in mind that different credit card companies offer different interest rates. So make sure you know what you're getting into. Some may try to get you to sign up by offering low rates for a short time, but the regular rates can be as high as 40%.
Since there are no set rules about interest rates and penalties for late payments, some issuers take away the teaser rates if the borrower doesn't pay on time and give them a penalty interest rate instead. Some can even charge interest even if the whole balance is paid off by the due date.
You should look around for credit cards that are very inexpensive. But charging low rates is not enough. The card should have terms that are good for the person who wants to use it.
