Obtaining a credit card can be an exciting experience. You're probably delighted to explore the advantages of having a card. However, you don't have to be one of the many young adults who land into problems when using credit cards for the first time.
Your first credit card has the power to either introduce you to a whole new world of financial options or to plunge you headfirst into severe financial difficulties. It all depends on how you use it, as using a credit card responsibly can help you establish credit for the future. However, it's crucial to understand as much as you can about how credit cards operate before applying. We discuss five crucial things to take care of before getting your first credit card.
Type of credit card
It is crucial that you are aware of the many kind of credit cards available in India. Instead of choosing the first one you lay your eyes on, consider your needs. Do you require superior deals on e-commerce or food delivery websites? The truth is that there are trade-offs involved with all of these, and very few cards will offer you everything at once.
For instance, you can choose a credit card with a low annual fee if you are new to using credit cards. Additionally, you may select a credit card based on your requirements and demands, such as a fuel credit card, a travel credit card, a shopping credit card, etc.
Credit score and credit limit
Both whether you are approved for a credit card and the interest rate you receive depend on your credit score. A higher credit score will often make it easier for you to get a credit card with a reduced interest rate. Higher credit ratings may also be required to obtain credit cards with rewards schemes.
When selecting a new card, a credit limit that is 1-2 times your monthly spending is a smart place to start. Although it's a common sales trick to offer a greater credit limit, don't be tempted by it. The truth is that as long as you maintain and exhibit responsible credit behaviour, your credit limit will increase.
Verify all the significant fees and charges associated with the card. The joining cost, annual fee, transfer charges, finance charges, cash advance charges, foreign transaction fees, over-limit fees etc are some of the charges you should keep an eye on.
Make sure you are familiar with all of these figures to avoid being hit with unforeseen costs. Some issuers charge this annual fee to maintain the status of your account. A credit card with no annual fee can be something to take into consideration if you're trying to keep prices down.
Keep your spendings under check
Regardless of your credit limit, it is important to keep an eye on your expenditures. The top applications are included with some of the best cards. They provide graphic representations of your spending history and interactive passbooks. Keep track of your spending and balance often. You'll be able to identify any fraudulent transactions as well as keep track of your expenditures.
Irrespective of the credit limit set for you, you must start off by using about 30% of it and make every effort to keep it under 50%. Your strategy when first using a credit card should be to develop good spending habits.
Late payments and grace period
You should be aware of the penalties you might face for making a payment on your debt after the scheduled due date. If you pay late, you risk not only paying more fees but also having your late payment reported to the credit agencies, harming your credit history and lowering your credit score.
If you pay off the new debt in full and before the payment due date within the grace period, the issuer won't charge you any interest on the transactions you made. The grace period begins at the conclusion of the billing cycle and lasts until the following payment due date. If you miss the deadline to settle your debt in full and lose the grace period, you will be penalised with interest on the remaining balance.
Credit cards are effective financial instruments that, when used carefully, may help you in a variety of ways, including helping you establish your credit history. However, regardless of one should m ake an effort to develop sound financial habits, select a card that accommodates your demands, and keep themselves updated.