Check your junk mail at any given time and you’ll surely find a credit card offer or two hidden in among the grocery store coupons.
If you have never had a credit card, the offers laid out in these mailings can be a little tough to understand. All sort of different deals and numbers are thrown at you, but what does it all really mean?
Generally, the only thing you should really be looking at is the credit limit and the interest rate, as these are the most important.
We will get into those in this article, but let’s look at 4 things you should consider before you fill out that application.
Use A Credit Card, Don’t Let The Credit Card Use You
The first thing to consider is why you want to get a credit card in the first place. Most people like to have a credit card for emergency purposes or in case they run into some sort of cash flow problem. If you can maintain the card for those purposes only, a credit card might well be a good idea.
Properly maintained, it can help build your credit score, but mismanage it, and you can be left paying off that card for years on end. If you are concerned about cash flow, look for a card that offers instant cash from any ATM.
Be smart about the credit card game or the system will play you straight into debt.
Does A Credit Card Fit Into Your Monthly Budget?
The next thing to consider is how having a credit card is going to affect your monthly budget. This will depend on how you decide to pay your outstanding balance. Some people prefer to pay the whole balance off, while others stick to the minimum payment. Going the latter route can lead to you balance quickly creeping up, as the minimum payment often barely covers the interest.
Get A Rewards Credit Card With No Yearly/Monthly Fee
If you want to get more out of your credit card, consider choosing one that comes with incentives. Some cards offer cash back that can be applied to your outstanding balance, while others are linked with specific companies or airlines. The offers are essentially limitless, so think about what you would benefit from the most, and choose the credit card with the incentive that best fits that need.
For example, if you travel a lot, you may want to choose a credit card that offers air miles. If you have a long commute to work, get a rewards card that offers rewards for gas purchases.
Watch Out For Hidden High APR Rates
One of the most important things to consider when choosing a credit card is the Annual Percentage Rate (APR). Some credit cards will lure you in with a low APR, only to crank it up once the introductory period is over. It goes without saying that you should be on the lookout for a card with the lowest APR possible, as it will have a direct impact on the amount you have to pay back over and above what you spend.
Many cards will seduce you by advertising a very low introductory rate in big font. But what’s the rate going to be in a year? Good luck finding that out, since it’s probably hidden in the fine print.
Credit cards can be a valuable tool to have in your financial arsenal, but they can also turn into a ball and chain tied to your feet if you are not careful. It all begins with making a good credit card choice at the start.