In the era of plastic money, our credit and debit cards seems to be an easy way out. While debit card is pretty straight forward, things get tricky with the credit cards. Here is what you need to consider if yo are opting for the credit card.
The thing about credit cards is that it encourages expenses of credits. This habit can be dreadful for your financial condition if you do not practice what they call "self-control".
So what can be done? It is always good to reconsider your decision of acquiring the credit card.
1. Study your spending habits - Carefully analyse your spending habits first. Would you be able to pay off monthly? or you are more of a person who would like to carry the balance? In case you would be paying off monthly then interest rates won't be a matter of concern to you, however if you wish to carry the balance then check for the lowest available interest rates.
2. Credit limits were given - The credit limit given is vital. Your bank can let you borrow the sum depending upon your credit scores. In case your credit limit is low and you end up making it a raise then that would further hamper your credit scores. Hence, estimate your required credit limits before opting any of the credit cards.
3. The purpose of the credit card - You need to decide the purpose for which you wish to own the card. You can pay off your day to day expenses via credit card while keeping your savings aside. On the other hand, you can also use it for larger purchase however you wouldn't be owning the funds until after purchase.
4. Reward points - There are a lot of reward programs offered on credit cards. Each time you buy something using the credit card you gain several points which can be further utilised towards other purchases such as travel or retail.
Annual fee - Annual fee is charged on some of the unsecured and most of the secured credit cards. When it comes to unsecured credit cards the annual fees is charged on the high-value reward cards. You can cut this expense down by getting a card without an annual fee. However, if your expenses are high then a free card may net you rewards.
Late payment fees - In case you fail to pay the minimum amount for payback, you would be charged late payment fees. However, you can always avoid them by repaying on time.
Over the limit fees - You would be asked to pay this fees to incase your balance exceeds the credit card limit and still if you want it your card to be accepted.
Owning a credit card is a matter of convenience, however, with every credit purchase comes a responsibility that you require to take care of.
Stories by Shweta Suvarna