First-time credit card applications may be nerve-wracking. After all, there are many credit cards to choose from, each with its own potential pitfalls. Credit cards, however, are potent financial instruments that may assist you in various ways if you use them wisely, including establishing a solid credit history.
Here are the 5 credit card tips you should know before applying for your first credit card.
1. Credit Card Types
Understanding the many credit card options available in India is crucial. If you are just getting started with credit cards, for instance, you may want to consider applying for a card that has no annual fee for new cardholders. In addition, there is a wide variety of credit cards from which to choose, including those specifically designed for travel, shopping, cashback, gasoline, etc.
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2. Lookout a loan if you need
Bad credit personal loans are another option made possible by credit cards. Do not try to borrow money from other sources if you are in need of assistance with your finances. You may get one by paying for it using a credit card.
Many situations call for the use of a credit card. Who needs cash when plastic can do the job? The convenience of credit card transactions, including rewards points and the ability to make purchases in a pinch, make them a better option than debit cards. Learn the ins and outs of your card’s reward system, interest rate, and fees. Finally, before you sign that application, do some comparison shopping for cards online to choose the one that best suits your needs.
3. Finding a Comfortable Level of Debt-to-Earnings
This is essential, regardless of your credit limit, to monitor your spending habits. While a solid payback history is important, the credit usage ratio is also a factor in determining how healthy your credit is. If you utilize more than 30–40 % of your available credit on your cards, your score will drop since you’re seen as having a higher risk of paying off your obligations on time.
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4. Before applying, you should see the rates and costs
Interest rates and costs for credit cards must be disclosed by issuers in accordance with federal law before you can apply for one. You may find this information in a Schumer box, a table often included with paper applications or accessible through a link labeled “Rates and fees” or “Pricing and conditions” on the application page of a credit card’s website. There are a variety of cards in the Schumer set.
What it costs each year to issue the card to new customers.
Annual Percentage Rates or APRs. Interest accrued on accounts from month to month will be this percentage. Depending on the sort of amount transferred or taken out as a cash advance, certain credit cards have varying interest rates for each (cash withdrawn with the card, usually at an ATM). Only a small fraction of credit cards charge penalty APRs on overdue accounts.
Fees assessed for making purchases outside of the United States, known as “foreign transaction fees,” often equal to 3 percent of the total cost of the transaction.
If you are late with your payment by more than one day, or if your payment is less than the minimum required, you will be charged a late fee.
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5. Spend no more than 30% of your credit card limit
Maintaining a credit utilization ratio below 30 percent is an excellent method to maintain a decent credit score. Credit utilization is the ratio of utilized credit to total credit. If, for instance, your Credit Card limit is Rs 1,00,000, you should not charge more than Rs 30,000 in a single transaction.