In this age of digitalization, reward points, discount offers, and cashback are influencing the buyers to spend impulsively. Therefore, it is challenging to resist swiping your credit card. If you are planning to get a credit card, then you may already know how it works. However, you should apply for the best credit card and use it responsibly so that you won’t end up in huge debts. If you focus on the details, then you can save your money and build up 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 with 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 the credit card can lead you to huge debts. Here are some lesser-known facts about the credit card apply, which helps you to avoid the debt trap.
- Go for beginners credit card
When you decide to opt for a credit card apply 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 having longer credit card history as well as higher credit scores. Further, one needs to meet specific income requirements to be eligible 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 your last resort. Unlike other purchases, cash withdrawal from credit card does not come with an interest-free period. The burden of interest 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
In case, you are starting with no credit score and having trouble in getting a credit card then you can consider availing a secured credit card. For a secured credit card, you need to deposit some amount of money first, and your credit limit equals to your security deposit. This is an excellent option for people with a low credit score. If you fail to repay your debt in time, then you will lose this deposit. Some credits provide you with the option 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 are paying off the amount steadily.
- 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 don’t be careful, then it can ruin your credit score.
Every month your credit card lender reports to credit card bureaus who then compile your credit reports and provide 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, then it can also affect your credit score.
- Go for a balance transfer
In case, you are in cash crunch, but you have a substantial balance on your credit card, then consider transferring the amount on your bank account instead of withdrawing it. By doing this, 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 transferred the amount from a credit card.
- Do proper research
Credit card lending companies are required to disclose certain information publicly such as annual fees, interest rates, etc. Before you decide on a credit card apply, 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 that are imposed when you withdraw balance from credit card, balance transfer, etc.
Apart from that, the bank imposes some amount when you transfer money to foreign countries. When you pay your debt late, then you need to pay the minimum due amount. These changes are unavoidable, but you won’t know about this until you opt for a credit card apply.
There is no secret of using a credit card sensibly. If you are a beginner and have a lower credit limit, then 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.