If you have got a bank account on your name in any of the banks, you must have probably got calls with this question from the other end – “Hello Sir, Do you need a credit card?” Credit cards have become something as common as debit cards and everyone from the lower middle class to the richest possess one. Do you know some really important facts and benefits of possessing a credit card? Here I unfold it for you along with all the basic facts you need to know before shopping for it. Credits cards offer you many advantages including security as you don’t need to carry cash and convenience to buy what you need to, on credit. It also rewards you when you make a purchase.
Along with many advantages of credit cards you also come across many responsibilities once you own it. Credit cards are to be used with care and wisely. It can help you in your financial state as well as can ruin your financial state too. Always make your payments on time and get perfect knowledge about the original price of the item bought on credit. Using a credit card for a purchase might seem easy but you must remember that you need to pay back what you buy on credit. It is like taking a loan and if you fail to pay the monthly amount on time you will have to pay interest on that amount. Here are some important facts that you must remember when dealing with credit cards.
Credit Card: Basic Facts
Make a Smart Choice: To get maximum benefit out of your credit card features you need to know your needs. Once you know your needs you will be able to make a proper selection while choosing a card for you. Some facts to be considered before choosing a card are mentioned below.
- The APR or the annual percentage rate and the way rates are applied. Are they fixed or variable
- Late fee, annual fee and the over-limit fee
- Grace period after end of the initial no-interest period
- Amount of credit limit assured
- Rewards offered including cash back and airline fares
Stay Attentive: You must stay alert about any offer that the card issuers may come up with. The card company might let you get aware of it through email, sms, etc. Keep track of these updates so as to utilize it if it suits you. It helps you to get aware of available credit, payment due dates, balances, purchases activity, and payment histories.
Know Your Rights: Credit card companies may provide you with various protections like zero liability which means that you need not be charged in case you report it promptly. If a product or service is unsatisfactory, you can dispute the purchases with the service provider or the manufacturer, retailer, etc.
The 20-10 Rule: This is a rule of thumb that teaches you how much credit you can afford to take as cash or through credit purchases. Credit card purchases are a type of loans and the 20-10 rules advises not to borrow more than 20% of your net annual income. On the other hand, you must not need to pay more than 10% of your monthly income. Following this rule will keep you safe, secure and financially stable.
Thus, having a credit card and the freedom to make purchases with it is something assistive to you but if dealt with carelessness it might lead to serious financial problems. Make sure that you choose a credit card that has features that suites you and the credit limit and interest rate is as per your financial condition and needs.
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