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All about credit cards
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10 things to keep in mind when looking for a credit card
Choosing a credit card
It might be intimidating to apply for your first credit card. After all, there are hundreds of credit cards in the market. But they are powerful financial instruments that may help you not only create a great credit history, but also benefit you in a variety of ways if utilized wisely. If you're thinking about applying for your first credit card, here are 10 things you should keep in mind.
There are different types of credit cards
It is essential that you understand the many sorts of credit cards available in India. If you're new to credit cards, for example, a starter level credit card with a low annual fee is a good choice.
Your earnings play a key role in determining your eligibility
Credit card companies will inquire about your income in order to assess your repayment ability. When applying for a credit card, your salary is quite significant. This is confirmation to the credit card company that you will be able to pay your payment. As your financial level rises, so does the number of card options available to you.
Begin with a small credit limit
To reduce risk, credit card providers may generally offer you with a limited credit limit at first. When you've gotten the hang of handling your credit card, the issuers will give you the choice of boosting your credit limit. Also, since your credit limit is related to your income, if you make a low pay, your credit limit may be restricted.
The terms and conditions of credit cards are important
It's important to be familiar with all of the terms and conditions since they include information that you consent to when you use the card. Read up on the card's APR range, associated fees, how incentives operate, and any other important data. Also, read the tiny print in the terms and conditions carefully.
Interest plays a major role too
If you pay off your credit card amount in full and on time, you will plainly be utilizing the bank's money for free since you will not be charged any interest. However, if you carry a debt from month to month, you will be charged interest based on your card's annual percentage rate (APR). The APR is normally between 30 and 40%.
Be mindful of the grace period and how it works
If you pay off the new debt in full and before the payment due date, the issuer will not charge you any interest on the transactions you made during the grace period. From the conclusion of the billing cycle until the next payment due date, there is a grace period. You will be charged interest on the outstanding amount if you miss the grace period by not paying your debt in full before the due date.
Look at the charges and fees associated with the card
Make sure you go through all of the card's major fees and charges. Joining costs, yearly fees, financing charges, transfer fees, cash advance charges, international transaction fees, over-limit fees, and more are all things to keep an eye on. Make sure you're familiar with all of these figures before you're hit with unexpected fees.
Be aware of the late payment penalty
You should be aware of the penalties that might be incurred if you pay your debt beyond the due date. If you pay late, you risk not only incurring additional fees, but your creditors may also report your late payment to credit agencies, damaging your credit history and lowering your credit score.
Recognize the credit card environment for teenagers and young adults
Getting your first credit card might be difficult, particularly if you're under the age of 21 and don't have a job. Adults under the age of 21 must show verifiable income before being authorized for a credit card without a cosigner, according to federal law. A source of income must be a job. Child support or government assistance, on the other hand, may help you become authorized.
If you don't have any money, you'll need to locate someone who will establish a joint credit card with you or add you as an authorized user on one of their cards. Insufficient credit history is another factor that makes obtaining a first credit card difficult.
Make certain you're prepared to get your first credit card
Just because you're old enough to get a credit card doesn't imply you're ready for one. You must be responsible enough to charge just what you can afford and to pay your payment on time every month. Obtaining your first credit card without being completely prepared might result in a credit catastrophe. It might be tough to repair your credit after it has been ruined. Don't set yourself up for failure by not learning all there is to know about credit cards before applying for one.
Bonus point: Credit card eligibility criteria
You also need to keep in mind the credit card eligibility criteria before you apply for one. The exact requirements, of course, will vary from one credit card issuer to another, and even from one credit card itself to another. Broadly speaking, however, the eligibility criteria may pertain to the following parameters.
- Your age
- Your salary
- Your credit score
So, before you apply for a credit card, take a look at the eligibility criteria and ensure that you qualify. This will make the approval process easier and faster.
On the one hand, applying for your first credit card is a significant achievement, but it is also a difficult undertaking. You must have a thorough understanding of how a credit card works and comprehend all of the terms and conditions associated with it. Understanding the chances and possibilities before deciding on one might save you money and help you earn a decent credit score.
A quick recap
- There are different types of credit cards and your earnings play a key role in determining your eligibility.
- Begin with a small credit limit, and read the terms and conditions on your credit card properly.
- Interest also plays a major role in your choice, and you need to be mindful of the grace period and how it works.
- Look at the charges and fees associated with the card and be aware of the late payment penalty.
- Recognize the credit card environment for teenagers and young adults and make certain you're prepared to get your first credit card.
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