Every person living in the western world most probably has a bank account. Most people have more than one. Around 511 million credit cards are issued in the US, and the average American has four of them.
If you’re applying for the first time for a credit card, you surely don’t know everything about it. You must be fully aware of what’s important and what you need to look for. There are different types of credit cards, and a lot of features that might be highly beneficial for you, or completely useless.
A credit card is a piece of metal or plastic that can interact with POS terminals and ATMs. It is a unique number connected to an account that has a particular money balance. It can be used for payments and raising loans without confirmation from the issuer.
When you’re looking for one, you must know all the pros and cons coming with it. That’s why we prepared this article – to show you the most important issues and features that will help you make the right decision when choosing a credit card. Keep reading to learn more about these things and make sure you’re doing the right thing.
1. Look for a low-interest rate
The interest rate is everything in the financial world. Banks, lenders, and everyone else who provides loans will aim for a higher interest rate because this is the main way to earn profits from providing loans to their customers.
The interest rate is the amount that they get as compensation for lending their funds. It is the same with the popular kredittkort or the credit card. When you get one and you spend the money from it, they need to come from somewhere. The issuer of the card is the one that provides the money.
For this, they are going to charge an interest rate on all the funds you use. The interest rate may be insignificant, or huge. Look for an account that will have a low-interest rate. That way, you’ll pay back the money you borrow with just a small interest.
In other words, if you borrow $5,000, and you pay back $5,300 at the end of the year, but you never once cared about whether you have money or not, then you can say you made a great deal. But if the loan is not affordable and you end up returning $7,500, then you lost a ton of money over nothing.
2. Check if they provide a grace period on purchases
One of the greatest features of credit cards is the possibility to buy something with a grace payment period. You go to a store and you love a TV that you can’t afford at the moment. You buy it instantly and put it on the card. The repayment will be handled additionally.
Another great thing about this is that you can pay and un-pay, sort to say. Let’s say that you have a contractor at home redecorating your bathroom. They place tiles all across the room, but after two days, some of them fall off. You stop the payment and get the money back until the contractor comes and fixes the problem permanently.
This is a common practice in the world. If you pay with a debit card and the job is finished, there’s a great chance that you’ll never see these contractors ever again. Instead of letting this happen, you’ll cut their payment, and they’ll be forced to come over if they want their money for the job.
3. Ask how much you can go into debt – the more the better
Before your application is approved, you’ll be asked to provide some documents about your income. Depending on how much is it, you’ll be approved more or less going into debt. Those with a yearly income of over $100,000 will get way better terms than those earning only $40,000.
The reason for this is simple – if you’re competent to earn a lot of money from your work, you’ll be able to spend more too, and also return them. The banks see you as eligible for more debt because they know you’re good for returning them without a problem.
Some account holders have especially designed limits that can go as low as you want. They are issued to people that have proven to always have enough funds to cover their debt. These people never worry about having money, as their cards are filled to the top anytime they want.
If you earn more than the average American, it’s wise to ask for a lower limit. It doesn’t matter what the original terms are, you can always make a personal arrangement with the card issuer. The lower you can go, the more options you’ll have in life. Spend when you want, pay when you have enough to do it.
4. Make sure there are no hidden transaction fees
When you want to manipulate with your card, you don’t want to see fees for something you thought it’s free. The worst thing in the financial industry is stealing from your clients. For example, a lot of banks have imposed a charge for checking how much funds you have on your account.
This is nothing else but stealing. Ask for the card issuer if they plan to impose these kinds of things on you. If they tell you that you’re not going to be charged anything while working with it, then consider them as a great company that’s worth working with.
If they start explaining that they must do these things, then walk away and look for another financial institution to entrust with your earnings. They have no charges whatsoever when you do things like these, and there’s no logic to be charged for them. Learn more about them here.
5. Learn more about the reward program they provide
Almost all serious financial companies providing credit cards will give you a chance to win rewards by spending money from your credit card. It seems illogical, but it really is. When you put items on the card, you’re charged with the interest. At the end of the year, this interest will surely be higher than the award you’ll get.
However, different providers will have different rules. Look for those who seem to have the best options. See what they offer and what you can benefit from the spending. For example, if they have a cashback program, make sure that the interest of the cashback is higher than 3%. Some companies provide up to 6%, so have this in mind when you’re making choices.
As you can see, there are lots of things you need to know before applying for a credit card. You can’t just walk into the first bank you see out there and ask for one. There are tons of small points to know and making decisions about them is a must.
Of course, nothing ever is perfect, and you may not make a perfect choice. Don’t worry, you can always close your credit card and for someone else to issue a new one. As we said, the average American has four of them, so you can always get a new one.