Nowadays, you have plenty of credit card options. However, it’s a good idea to research credit cards before you apply so you know that you’re getting a good deal for your lifestyle and building your credit at the same time.
Here are some of the most important things you should consider if you’re thinking about applying for a credit card:
You Have Options
There are plenty of perks you can choose from when applying for a card. A popular choice is a cashback credit card. This option is great for people who plan on spending a lot on their credit cards and paying down the balance every month.
For instance, if you’re looking for a card for your business, you might be spending thousands of dollars every month on supplies and equipment. Even 1% cashback can add up when you’re spending $5,000 or more each month.
It’s like getting extra compensation just for running your business just like you give bonuses and other forms of compensation to your employees. You can use this extra money to buy supplies, or you can let it roll into your regular, monthly expenses.
Another popular choice is the ability to earn points on major airlines. This is a fantastic choice for those who love to travel. It can take a while depending on your spending habits, but you can eventually earn a free vacation.
You’ll Have to Start Low
If you don’t have much credit or your credit history has been damaged, you’ll need to start with a card that has a higher interest rate and lower spending limit.
Basically, you need to show credit card companies that they can trust you with higher spending limits. They’ll probably charge you a higher interest rate because they’re taking more of a risk with you than they are with someone who has an established, trustworthy credit history.
A Credit Card Can Build Credit or Ruin It
Don’t be fooled into thinking that once you have a credit card you’re always free and clear. Credit can be ruined fast if you fail to make your payments on time every month.
On the positive side, credit cards can build your credit substantially if you make the full payment every month.
Understand the Minimum Payment
When you get your credit card statement every month, you’ll see the full amount that you charged, and you’ll see a minimum payment.
The minimum payment is the amount that you must pay each month to avoid doing damage to your credit score. You need to remember that credit card companies report your activity each month, so if you can’t pay the full balance, it’s still necessary to pay the minimum amount.
However, the total amount that you’re carrying over from one month to the next on your credit card also impacts your credit score. Ideally, you should be carrying less than 30% of your total limit over to the next month.
Understand the Difference Between Secured and Unsecured Credit Cards
If your credit score is low, you might need to start with a secured credit card. With this type of card, you’ll be required to put down a deposit before you start using it in case you fail to pay your bill.
The nice thing about this kind of card is that it can help people who have poor or no credit to build up their score. In contrast, unsecured credit cards can also help you build up your score, but you don’t have to put anything down on the card. You will only qualify for an unsecured card if you have either neutral or good credit.
Both types of cards can act as a safety net in case you need cash quickly, such as when your health benefits plan doesn’t cover the cost of expensive medication.
Always Prepare Yourself Before Applying
Whether you want to use a credit card to build up your credit score or as a way to safely pay bills, you should invest the time into researching which type of card will best suit your lifestyle.
Aarvi the owner and senior content publisher at Financeclap. Aarvi completed his education in BBA (Bachelor of Business Administration), and recently she was working as an assistant manager for the accounts company. She also works as a senior digital marketing consultant for one IT company in 2018. The main idea for starting Financeclap is to provide the best and helpful information related to the business industry to the readers. Aarvi main hobbies are playing cricket, watching videos and listening to music in the free time. You can learn more about her on about us page.