Things To Know While Availing Of A New Credit Card
Applying for a new credit card for the first time can be a daunting experience since there are numerous credit card options available in the market, which doesn’t make it easier to choose one that best serves your needs.
Credit cards are excellent financial tools to meet various planned and unplanned expenses. However, it is essential to conduct thorough research before making your mind about a particular credit card. First of all, you need to analyze your finances and define your needs. For instance, do you want to build credit or make a purchase or earn rewards?
Your reasons may be anything, but you need to know them in advance to get a credit card based on your requirements. If you are applying for your first credit card, here are the important things to remember.
Things To Know While Availing Of A New Credit Card
Income
Your income information is a critical factor to check your repayment capacity. The credit card issuers decide whether to approve or reject your application based on your income. It is an assurance for the issuer that you will not default on your credit card payments.
Credit limit
The credit limit is the amount you are eligible for as a loan. For first-timers, it is advised to initially apply for a low credit limit, albeit the card issuers usually approve low credit limits to people who are seeking for the first time to decrease risk.
The credit card issuers will offer you the option to increase your credit limit once you learn to manage your credit card.
Terms and conditions
Before applying for a new credit card, it is crucial to know all the terms and conditions to be well informed. They contain information such as the card’s APR range, applicable fees, and how different rewards and offers work.
Types of credit card
There are multiple types of credit cards in the market based on individual specific needs. So, it is vital to know what type of credit card you need. For instance, if you apply for the first time, you can opt for a beginner-level card with a low annual fee.
Applicable fees
There are specific fees applicable while applying for a credit card, such as joining fee, annual fee, finance charges, transfer fees, foreign transaction fee, over-limit fees, etc. While availing yourself of a new credit card, make sure that you are well versed in fees related to the card to avoid unexpected charges.
Late payment penalty
Needless to say that if you default on credit card payments, you will have to incur late payment penalties. Late fees are charged when borrowers make payments after the due date. Besides incurring extra charges, late payments also damage your credit score, due to which you will not be able to apply for loans in the future.
How is interest charged for credit card usage?
The bank does not charge interest if you make timely repayment of the balance. However, if you carry the balance from one month to the next, you will have to incur interest on the balance. The interest rate usually ranges from 30 to 40 percent (based on your card’s APR).
Conclusion
If you are applying for a credit card for the first time, you must understand how it works and carefully read all the terms and conditions related to it to avoid additional fees.
