In this digitalization age, reward points, discount offers, and cashback influence buyers to spend impulsively. Therefore, it is challenging to resist swiping your credit card. If you are planning to get a credit card, you may already know how it works. However, you should apply for the best credit card and use it responsibly so you won’t end up in huge debts. If you focus on the details, you can save money and build a good credit score in no time.
Lesser-known factors to consider before getting a credit card
Getting your first credit card is a giant step. It takes time to get adjusted to your credit card usage. However, you should not be lured by the amazing deals online and try to use your card responsibly. Mismanagement and over-spending with credit cards can lead you to huge debts. Here are some lesser-known facts about credit card applications that help you avoid the debt trap.
Go for a beginners’ credit card.
When you opt for a credit card, application online or offline for the first time, you may not get a premium credit card that offers many perks and 0% interest charges. Because such cards are for users with longer credit card history and higher credit scores. Further, one must meet specific income requirements to qualify for such credit cards. You should consider starting with a credit card with a smaller credit limit. Besides, you should not borrow the maximum amount because it can affect your credit score.
Using credit cards for cash withdrawal
It is easy to withdraw cash using credit cards, but it should be your last resort. Unlike other purchases, cash withdrawal from a credit card does not come with an interest-free period. The interest burden starts to pile up from the day you withdraw cash using a credit card. Even some credit cards impose a cash withdrawal fee as well.
Make a security deposit.
If you are starting with no credit score and having trouble getting a credit card, you can consider using a secured credit card. You need to deposit some money first for a secured credit card, and your credit limit equals your security deposit. This is an excellent option for people with a low credit score. You will lose this deposit if you fail to repay your debt in time. Some credits allow you to deposit more money to increase your credit line.
Avail EMI option
It can be challenging to pay off the whole debt at once. You should convert your debt into EMIs then, you can prepay your debt quickly. The EMI option also provides lesser interest rates as you steadily pay off the amount.
The first card makes your first impression.
Your first credit card can either build your credit score or ruin your chances. One of the major reasons for opting for a credit card is to boost your credit score. But if you aren’t careful, it can ruin your credit score. Your credit card lender reports to credit card bureaus every month, compiling your credit reports and providing a credit score. Your credit score is defined by several factors, such as your repayment history, usage of credit, etc. If you borrow the maximum amount from your credit card, it can also affect your credit score.
Go for a balance transfer.
If you are in a cash crunch but have a substantial balance on your credit card, consider transferring the amount to your bank account instead of withdrawing it. You can transfer the amount to another card at a low-interest rate. However, you must pay your debt in time, even if you have moved the amount from a credit card.
Do proper research
Credit card lending companies must disclose certain information publicly, such as annual fees, interest rates, etc. Before you decide on a credit card application, you can check online all the details. There is a yearly fee that a credit cardholder has to pay every year. Besides, one needs to pay APR percentage changes imposed when you withdraw a balance from a credit card, balance transfer, etc. Apart from that, the bank charges some amount when you transfer money to foreign countries. When you pay your debt late, you must pay the minimum due amount. These changes are unavoidable, but you won’t know about this until you opt for a credit card application. There is no secret to using a credit card sensibly. If you are a beginner with a lower credit limit, try to pay your credit card debt in time. Once you build a good credit score, then you can opt for maximizing your credit limit.