When you are given a credit card, you are given permission to buy things before you pay for them. This is because the credit grantor trusts that you will pay them back in the future. You might not believe it, but you don't have to have great credit to get a credit card. In reality, though, those with better credit will get lower interest rates, while those with bad credit may have to pay higher rates and extra fees to get credit.
There are so many lenders who want to give you credit that it can be hard to know which one is best for you. Instead of applying for a bunch of credit cards at once, which will hurt your credit score a lot, you should pick the ones that fit your needs and, more importantly, your budget.
The APR, which stands for Annual Percentage Rate, is one of the most important things to think about when choosing a credit card. Is it set or does it change? A fixed rate doesn't change from month to month. A variable rate, on the other hand, doesn't follow a set pattern. In other words, a variable interest rate can go up or down from one month to the next, but a fixed rate can't.
Check the credit card agreement for other fees, such as an annual fee, a monthly account maintenance fee, a processing fee, a one-time activation fee, etc. Also, pay close attention to any fees the lender will charge for a returned check, a late payment, and/or whether or not the credit grantor participates in "Universal Default." This is a practise that lets one credit grantor raise your interest rates just because you defaulted on a debt with another creditor.
When picking the right credit card, the credit grantor's policy on unauthorised charges is another important thing to think about. For example, do you have to pay on an amount that is being disputed? Most credit cards require written notice of an unauthorised charge. At that point, the amounts in question will be looked into without you having to pay anything until the problem is fixed.
Believe it or not, the credit limit is the last thing to think about when choosing a credit card. Depending on how much the credit card company charges you in fees when you first get the card, you may or may not have a lot of credit left when you turn it on. For example, if a credit card company gave you an account with a $250.00 credit limit and you had to pay a $99.00 one-time activation fee, a $69.00 annual fee, and a $5.00 monthly account maintenance fee, you would only have $77.00 of available credit when you got the card. You can find out more about these kinds of fees and minimum credit lines in the cardholder's agreement or on the website of the company that gave you the credit.
The information in this article is only meant to be used as a reference. It shouldn't be used as a substitute for or in addition to professional financial advice about choosing and/or using credit cards. Check with a financial planner or your cardholder agreement for more information.
