Pierce Terry asked:
Credit cards, if chosen wisely, can be a good way to improve your credit rating and they are good to have in case of an emergency. The wisest policy is to never charge so much that you can’t pay off the monthly balance and to opt into cards with a reasonable limit that you know you could borrow and still be in good shape. Here are some things to look for in a credit card:
Fees:
Annual fees aren’t appealing at first glance, but they are only a factor in the deal. Usually cards that have such fees also have great benefits that pay off if the card is used enough. If you see a card with an annual fee, check to see what the rewards programs involve and if, with your expected amount of use, they will be more beneficial to you than the card without the fee. There are many cards without annual fees and rewards programs as well, so shop around.
Rewards:
Credit cards have all sorts of rewards programs to lure you in with promises of gift cards and cash back, but they also come with higher interest rates more often than not and only pay out around 0.5% what you spend with them. Cash reward cards are better for the card user that pays off the balance every month because of this. Gauge what type of rewards would really pay off by what sort of program it has. If you tend to charge up large balances each month, a tiered rewards program would benefit you more because the higher reward percentages only kick in for the big spenders.
Interest Rates:
You can’t expect a low interest rate if your credit is dismal but shop around as much as possible. Interest rates are both a security net and a source of income for a card issuer. If your credit isn’t good, a card issuer will charge enough so that in the event of a default, they do not lose any money because you have basically paid your balance in full over months of just paying off the interest. Consider this and how much having a card will actually cost you in the end. If you don’t pay off your balance every month, you are subject to this. Some cards even allow one year without interest, but read the fine print because your rate could jump up to over 10% after that initial year.
Credit Limits:
Credit limits are mainly determined by looking at your credit rating and your reported yearly income. Your limit may rise if you report a higher salary, make consistently on time payments, or if your credit rating improves. Little credit experience also is a factor so after a few years, you may be eligible for a higher limit. Credit limits are serious commitments though. Determine whether you are capable of having such a large line of credit available to you without buckling and overspending. There is nothing wrong with choosing a card with a lower limit if you know you are incapable of handling that much responsibility or paying off that large a balance within a year or so.
Alice
Credit cards, if chosen wisely, can be a good way to improve your credit rating and they are good to have in case of an emergency. The wisest policy is to never charge so much that you can’t pay off the monthly balance and to opt into cards with a reasonable limit that you know you could borrow and still be in good shape. Here are some things to look for in a credit card:
Fees:
Annual fees aren’t appealing at first glance, but they are only a factor in the deal. Usually cards that have such fees also have great benefits that pay off if the card is used enough. If you see a card with an annual fee, check to see what the rewards programs involve and if, with your expected amount of use, they will be more beneficial to you than the card without the fee. There are many cards without annual fees and rewards programs as well, so shop around.
Rewards:
Credit cards have all sorts of rewards programs to lure you in with promises of gift cards and cash back, but they also come with higher interest rates more often than not and only pay out around 0.5% what you spend with them. Cash reward cards are better for the card user that pays off the balance every month because of this. Gauge what type of rewards would really pay off by what sort of program it has. If you tend to charge up large balances each month, a tiered rewards program would benefit you more because the higher reward percentages only kick in for the big spenders.
Interest Rates:
You can’t expect a low interest rate if your credit is dismal but shop around as much as possible. Interest rates are both a security net and a source of income for a card issuer. If your credit isn’t good, a card issuer will charge enough so that in the event of a default, they do not lose any money because you have basically paid your balance in full over months of just paying off the interest. Consider this and how much having a card will actually cost you in the end. If you don’t pay off your balance every month, you are subject to this. Some cards even allow one year without interest, but read the fine print because your rate could jump up to over 10% after that initial year.
Credit Limits:
Credit limits are mainly determined by looking at your credit rating and your reported yearly income. Your limit may rise if you report a higher salary, make consistently on time payments, or if your credit rating improves. Little credit experience also is a factor so after a few years, you may be eligible for a higher limit. Credit limits are serious commitments though. Determine whether you are capable of having such a large line of credit available to you without buckling and overspending. There is nothing wrong with choosing a card with a lower limit if you know you are incapable of handling that much responsibility or paying off that large a balance within a year or so.
Alice