Credit Cards play an important role in simplifying our lives. You can buy many things when you do not have money in the bank account or wallet. Therefore, it is very important to choose the credit card carefully. There are various rules that you must know before going shopping for credit cards.
1. Rate of Interest: It is the fees paid for the privilege of borrowing money and one of the important factors that one looks out for when lending money. It is expressed in annual percentage rate. The higher the interest rates, the more money you pay in interest. The interest rate is two types i.e. fixed and variable interest rates. Under the fixed interest rate scheme, the card maintains the same interest from month to month. A variable interest rate fluctuates from month to month and can increase your overall balance as the amount of interest you’re charged increases. Hence, try to get the fixed rate to avoid any unforeseen surprises.
2. Credit Limit: It is the maximum amount that can be borrowed on a credit card without penalty. The person with good credit can receive credit limits into the thousands. If you go beyond your credit limit, then the credit card issuer may not charge any extra fee, but it can affect your FICO score.
3. Fees: There are various charges associated with a credit card. The credit issuer may charge fees for cash advances, late payments, requesting an increase in your credit limit and balance transfers. These charges vary from card to card.
4. Reward Options: There are also some reward options that may come up with your credit card. It can be in the form of free airline miles, cash back offers, discounts on purchases, etc. Ensure that you get a reward system that works for your lifestyle.
5. Spending Habits: If you’re the type who likes to carry a balance, then you have to ensure that the card you choose will allow it. Some cards require to pay the full amount every month. You should read the terms and conditions before accepting the offer to ensure you don’t get in over your head.
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