Credit cards, no matter what you think of them, are important financial documents in this day and age. Want to rent a car? Pay for online purchases? Buy a smartphone plan? Then you need to have a credit card. Having an excellent credit history also helps you in acquiring bigger loans in the future- like in getting a loan from a bank for a house or a car.
So now you’ve just made a major financial milestone and got yourself your first credit card. Now what? What are the things that you need to know about that piece of plastic in your hands?
What is a credit card?
A credit card gives authority to the person using it to purchase goods and services on account, to be paid after a certain time period has passed (usually a month). Think of it like a month-long loan from a bank; the bank pays for your purchases in the meantime, and you pay back the bank after a month.
What are the charges that a credit card user should expect?
Most credit cards have an annual fee, a flat charge that a credit card user has to pay yearly to keep his or her card active. Next you have a finance charge; this is like a credit card usage fee- it’s the money that you need to pay to the bank every time you use the card for purchases or cash advances. If you’re late in your monthly payments (credit card issuers usually allot a grace period for payments), then you may also be charged with penalties too.
How can I keep my credit card costs down?
Read and follow your credit card payment guidelines to a “T.” These guidelines are usually printed at the back of your card.
Always pay your balance in full, every month. This practice will help drastically reduce interest costs.
Take note of your cards’ fees. Each transaction that you make on your card has a corresponding fee. Over time, all of these extra fees can add up and you might be surprised with how much you have to pay come billing time.
Religiously pay on-time. Don’t even wait for the grace period to come along. Set up email alerts or an automated credit card payment scheme with your bank, if necessary.