Credit card or plastic money is a card issued to its holder entitling him/her to shop for goods based on the holder’s agreement to pay for the goods and services. It is quite convenient to use credit cards. But before one can opt for any particular credit card, one needs to know how a credit card operates, and compare all the available credit cards.
Taking a credit card for the first time
It is quite difficult to get a credit card for the first time. There are very few credit card companies who easily issue a credit card to a first timer, without any credit history at all. However companies readily issue credit cards to college students. A person should check out the details of the company and card before opting for the card. Other than students, people who have responsibly handled their savings and checking accounts can apply for a credit card with that bank.
The 9 features you should know about credit cards
A credit card consists of various features which are:
1. Credit line - This is the maximum pre-specified amount of credit allowed by the credit card company to the borrower on the card. It is the maximum amount that a borrower can draw when needed. However if one acquires good credit history with time, the lender can increase the credit limit.
2. Account opening fee - A fee is charged by the creditor for processing an account, or opening an account.
3. Maintenance fee – Some creditors charge an extra fee for maintaining the account. Before taking a credit card one should inquire into this matter.
4. Over limit fees – There are credit limits on credit cards. If one exceeds the credit limit, he/she is charged with extra fees. There one should always be aware of the credit limit.
5. Minimum payment – One is required to pay a minimum amount each month before the payment date is over. If this is not paid, interest rates may increase and late fees may be added against it.
6. Annual percentage rate – Annual percentage rate or APR is the rate at which one is charged with the interest. It varies according to the credit score of the borrower.
7. Default rate - If one fails to make timely payment, he/she can be charged with default rate.
8. Cycle date – This is the date on which a credit card holder receives his billing statement every month.
9. Payment dates – One needs to pay the dues within a stipulated time or the payment date. Paying in time is very important as it is related to the credit score.
7 Factors to be considered while choosing credit cards
The various factors you should consider before choosing a card are:
1. One needs to know the annual percentage rate (APR) and if the rates are fixed or variable.
2. Check out the annual, late and the over-limit fees.
3. Check out the credit limit on the account you are going to open.
4. Check the grace period before the interest starts increasing.
5. Check if there are any rewards or cash back policy.
6. Check if the credit card suits one’s lifestyle.
7. Check if the card allows balance transfer, that also with low and fixed interest.
Before applying for a credit card one should always check into the various details of the credit cards, as mentioned above and should also check whether or not he/she qualifies for the credit card. After getting a credit card, one should always try to handle it responsibly.