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HomeFinanceA Brief Guide to Credit Cards for first-time users

A Brief Guide to Credit Cards for first-time users

A credit card is the best friend you can have. You never feel short of funds anytime. You can buy anything you want, even if you do not need it and cannot afford it. Is it not a convenient instrument to have in your pocket? However, credit cards can act as a double-edged sword. First-time users might not be aware of the pitfalls of reckless use of the credit card. It can push you into a debt trap. Would you like to swim in debt carrying astronomical rates of interest? No, you would not. This guide can help such first-time credit card users to use these instruments for their benefit.

Choose the right credit card

Not all credit cards offer similar benefits. Choose the card that suits your spending needs. If you are a person who uses credit cards at different places, it is better to opt for one that offers cash-back offers on your purchases. If you are a regular online purchaser on ecommerce websites like Amazon, select one that gives you generous rebates on using the card on Amazon. A frequent traveler should opt for a credit card that offers attractive reward miles or points that you can use later on to obtain discounts on travel or accommodation in hotels.

Exercise self-control

A credit card is a tempting instrument. You could end up buying things that you might not need. As you do not have to pay immediately, it is natural for you to splurge and rake up a huge debt. People find it hard to resist temptation, but one should learn to exercise self-control and bring in an element of fiscal discipline. Otherwise, it does not take time for you to accumulate a debt that you might find difficult to repay.

Pay your entire credit card bills on time every month

The tip has a deep connection to the one discussed above. If you use your credit card wisely, you will be in a position to clear the entire credit card bill before the due date. The advantage is that you do not incur substantial debt. Secondly, you get the benefit of the interest-free period available on every credit card. Paying your bills on time has other advantages. You do not have to pay interest on your expenses. The APR can be as high as 3% per month. Besides, you do not incur late payment charges. Late payments can also affect your credit score thereby making it difficult for you to obtain other loans like personal loans, car loans, and home loans in the future.

Know the implications of incurring a credit card debt

The easiest way to slip into a debt trap is to miss your credit card payments. Your credit card has the provision of making a token payment also known as the minimum payment due to keeping your card alive. The minimum amount due can range from 3% to 5% depending on the card issuer. It looks like an attractive proposition. However, it is not. The moment you start paying less than the amount due on your card, you become liable to pay interest @ APR on the unpaid amount. Besides, every purchase made after that attracts interest @ APR until you clear the entire payment. In short, you lose the benefit of the interest-free period. Soon, you find yourself sitting on a mountain of debt. 

Read the fine print carefully

People have the habit of signing on the dotted line without reading the terms and conditions of the issuance of their credit cards. The fees constitute a significant portion of your card expenses. You have various costs such as renewal fees, and annual fees, cash advance fees, late payment fees, and so on. Select the credit card that has the lowest costs. The best aspect of reading the fine print is that you become aware of the possibility of seeking a waiver of some of the fees mentioned above. Banks usually do not pass on the benefits unless you ask for it.

Check your credit card statement carefully

It is advisable to make it a habit to go through the credit card statement every month as soon as you receive it. Maintain your credit card slips and cross check the amounts debited to your account. If you find any discrepancy, you should raise a dispute immediately. Provisions for raising such disputes are available if you do so in time. Be careful of the tiny unauthorized debits to your account. In the initial stages, it might seem trivial. However, it could lead to a significant fraud later on if you ignore these charges. Swindlers like to test with small and insignificant accounts before trying something big.

Do not be afraid to ask for benefits

Banks and credit cards usually accede to requests for waiver of late payments and even reduction in the APR occasionally. Do not hesitate to ask for it, because this benefit is only available to people who ask for it. To know more about the benefits click here.

Final thoughts

A credit card is a blessing in disguise as it provides you with adequate financial freedom. At the same time, it does not take long for the blessing to turn into a curse. Reckless use of the card can damage your financial reputation. First-time credit card users should exercise caution and learn to use the cards responsibly.

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