Credit cards offer a good alternative to loans, allowing you to choose how much of the available credit to use at a specific time. Compared to a loan, credit cards tend to be more flexible and sometimes come with added benefits. This may include interest-free periods, rewards, and even special discounts when shopping at selected stores.
According to recent statistics, about 61% of adults in the US have one or more credit cards. The average number of credit cards held by a consumer is four, and about 511.4 million of these cards are currently owned by Americans. Whether it is your first time getting a credit card or you are filling out an application for an additional one, the tips we share in this post will be helpful.
Understand The Perks
There are a lot of different credit card offers on the market today – and each company has its own set of perks that helps to attract customers. This can make the process of choosing one specific credit card a challenge.
Comparing different credit cards is a good idea. During the comparison, make sure you thoroughly understand the perks that come with each card. This will help you see which card could be more suitable for you, as there are times where certain parks would be useless to some consumers.
For example, if you use public transportation systems, then getting a card that gives you cashback rewards on gas refills is not a wise choice. Taking out a credit card that allows you to access an online educational portal will be useless if you not longer study.
Thus, match the benefits to your own life. If you are not sure which perks to prefer, look for a credit card that gives you cashback for general purchases. The cashback rewards can usually be loaded on your card from a mobile app or website.
Understand How It Affects Your Credit Score
Before signing up for a new credit card, there is an important matter to consider – it will have an impact on your credit score. This is a good thing in most cases, as your credit score will improve as long as you ensure you make your monthly payments toward the credit card. Keeping a positive balance also has a positive effect on your credit score.
Do, however, ensure you consider what you can afford. Avoid taking out a credit card that will come with monthly installments you cannot afford. If you are unable to pay the monthly fee for your credit card, this will reflect on your credit report – driving your credit score down and causing you to become less creditworthy.
Carefully Inspect Fees
Every credit card comes with its own set of fees, interest rates, and additional costs. You should always ensure you take a close look at the fees charged on the card before signing anything. The good news is that all fees and interest rates must be declared to the consumer before they sign for the card, which gives you an opportunity to inspect these factors.
It is also a good idea to get quotations from more than one credit card issuer. This will give you data to compare, allowing you to shop around for a better deal. Start by looking at the interest rate and see if there are interest-free periods. By utilizing a credit card with an interest-free period, you can save a lot in the process while still gaining easy access to finances when you need it most. This might also be referred to as a grace period.
Do not only look at interest rates, however. Consider admin fees, monthly account fees, and other charges. Some companies charge an annual fee instead of a monthly fee. There may also be transaction fees and statement fees that apply to the credit card. See how much the card may end up costing you based on your expected activities.
Conclusion
Taking out a credit card gives you a flexible financing option that can be used only when needed. There are a few factors you should be looking for when taking out a credit card, as this gives you better value and may also ensure you save some money in the process.