Are you ready to apply for your first credit card?

Finally, you have decided to apply for your first card. However, with so many options available in the market, it often gets challenging for the customers to pick the right one. Picking the right card can help you gain bonuses like build a credit history, earn while you spend and even protect your purchases. You definitely want the best for yourself. Credit cards also give you the power of purchasing even when you don’t have cash in hand. They are very handy in emergent situations. But like it is said, with power comes great responsibility; hence, the consumer needs to be careful while spending it.

People usually apply for cards because everyone around them is using it. But what you need to realize is that credit cards can also drag you deep if not used properly. Therefore, it is always a better idea to be aware of all the new ventures in your life. It helps you in getting prepared for any problems later.

The power of plastic money

Credit cards look identical to your debit cards but work in a totally different manner. Unlike your debit cards, credit cards don’t take funds immediately from your bank accounts when swiped. Rather, they give a time limit (grace period) to pay-off for your purchases. In simple words, credit cards act like a short-term loan that carries interest, but only if you don’t clear your bill in full till the due date.

Why do you need a credit card?

Credit cards are essential in today’s time. They work like an additional resource for spending. They can be a very useful tool, only if used properly. They can help in building your credit history. A good credit history will help you secure loans in future along with favourable loan conditions. Other than this, users can earn rewards in form of cash back or discounts or miles, in case of a travel card. Just applying for a credit sometimes is rewarding. Many credit cards companies offer sign-up bonuses. However, it is important to learn that misuse of a credit card can also lead huge amounts of debt. But armed with so many benefits, credits cards are definitely a great thing to have.

What kind of credit card you should go for?

There is no dearth of options when choosing a credit card. The biggest reason to own one is that it gives you the power to purchase products when you don’t have cash in hand. However, which one works best for you is a challenging thought. If you are a first time user, you should go for a low-interest credit card. If you feel that you would not be able to pay off your bills in full every month, the low-interest card can work in your favour.

There are also no annual fee cards. The annual fee is a one-time yearly charge. In other words, users would have to pay these charges once in a year. The annual fee is charged for the benefits provided with the card. However, there are options of no annual fee card which is usually for people with excellent credit history. So, if you have one, ask for a no-fee card.

People who travel frequently can go for frequent flyer cards. These cards help in earning miles under the frequent flyer program. It can help you save on tickets, upgrade your tickets, access to premium airport lounges and even complimentary travel insurance. A reward card is also an option for people who tend to make a good amount of purchases in a month. This card allows users to accumulate points every time they make a purchase which can be redeemed later.

People with high incomes and impeccable credit history can go for platinum cards and among them american express credit cards are very famous as these are premium cards with high annual fee, it provides them good reward points and also acts as a status symbol. These cards provide many benefits like discounts or free stuff but come with a high annual fee and heavy interest rates.

So, depending on your need, pick the right one.

Understanding the grace period

The grace period is the time limit given to users to pay for the purchases they made in a month. It is basically an interest-free period that is usually between 20 to 25 days. Payments made within the grace period do not carry interest. However, if you don’t clear the dues in full or after the grace period ends, banks would start charging interest on your average daily balance.

Minimum payments

The textbook meaning of minimum payments is a small amount user can pay every month without damaging their credit ratings. It gives a temporary relief, but you are ready to pay high-interest charges. Minimum payments are a menace and can get you in financial troubles. Making minimum payments each month will only make situations worse as it would keep piling debt. Minimum payments are only interest charges and they grow along with your balances. In short, you are just paying interest without clearing your principal.

Should you apply for a card?

Like mentioned earlier, owning a credit card is great as it can give a lot of benefits. But only if you plan to use it properly, apply for one. Taking just for the heck of it can do a lot of damage. Understand each and every aspect very carefully and then apply for one.