Some people love credit cards and some people hate them, but no one can deny that they are a great financial asset, providing many benefits to consumers.
There are many different types of cards and understanding them is a must to avoid paying unnecessary fees and save money.
1) What is a credit card?
A credit card is a small piece of plastic with a magnetic strip that allows consumers to borrow money from a bank to purchase something. In other words, it’s a short-term loan financial institutions provide to consumers or businesses.
2) Shop around
There is an enormous variety of credit card options and offers. You should always shop around to find the best deals and perks that fit your needs and budget.
3) Annual fee
Depending on your credit score, you might be able to get a no annual fee credit card. However, if your score is not great you might get a card with a $35-100 annual fee. Don’t forget it is negotiable, and if you discuss your options with the bank you might be able to waive it.
4) Avoid minimum payments like the plague
These fees are the minimum amount of your credit card balance you need to pay in order to avoid late fees and protect your credit score. It can be tempting to pay the $40 minimum fee on a $1,000 bill, but making minimum payments should be avoided because of the higher interest rates that can push you further into debt.
5) What is a grace period and how does it work?
A grace period is the period between the end of a billing cycle and the date your payment is due. During this time, you won’t be charged any penalties if you pay the balance in full before the due date .
6) The interest rates you’ll have to pay
Do you know how much the interest rates are on your credit card? Interest rates can differ depending on the type of card you have. They can be as low as 0% APR for a fixed period of time, to as high as 30%.
7) Rewards you can earn
Earning rewards is one of the best things about owning a credit card. Rewards can come in many forms such as cashback, shopping discounts, and hotel or travel points.