Credit cards are convenient, making it the most popular credit tool around the world. Individuals often apply for a credit card to boost their credit scores too. However, it is important to be equipped with the correct information before applying, especially if it’s your first credit card. Understanding a few basics will help applicants save time, money and effort.
It is achievable by asking the following questions and seeking answers to them from id god.
6 Questions to Ask Before Getting Your First Credit Card
1. What is the joining fee / annual fee of the card?
Credit card issuers offer different types of credit cards based on the person’s needs. Hence it is important to choose the right kind of card that suits your requirements. Additionally, not all cards have an equal annual fee attached to them. Applicants must check the annual fee for the chosen card. The annual fee is the credit card issuer’s yearly charge for using the card. This fee allows you to keep the card usable for another year.
2. What are the other costs associated with the card?
Apart from an annual fee, other costs are associated with the card too. It is essential to understand those:
- Interest Rate
The interest rate associated with the credit card is the amount the card user will have to pay when making monthly payments post the due date. The annual interest rate can come up to 24%, depending on the credit card company’s policies and the time delay on repayment.
- Foreign Transaction Fee
A foreign transaction fee is associated if the credit card is used outside the country. It is essential to know this if the cardholder is a frequent traveler.
- Late Payment Fee
Late payment penalties are charged when individuals make a payment after the due date. The fine is charged depending on the number of days the payment was delayed.
These fees and other hidden charges also help decide on a particular card issuer and a card that best suits the requirements.
3. What is the credit limit?
The credit limit is the maximum amount one can spend using the card. The issuer sets this based on the user’s credit score and profile. Hence it is a varying criterion. If you pay your loans on time, the credit card issuer may increase your credit limit as well. So, if you are using the card for the first time, check for your credit limit and ensure that you do not exceed the permitted limit. It is also necessary to ask if there are any charges for exceeding the credit limit.
4. What is your cash advance and limit?
There are situations when one would need funds above the cash limit, especially during an emergency. One can resort to a cash advance through the credit card for quicker funds in such a case. With the cash advance feature, customers can withdraw cash from ATM using a credit card. Understanding the interest rates associated and the cash limit that can withdraw beforehand will help you understand the expenses involved.
5. What happens when you only pay the minimum amount due?
There are times when a sudden, unprecedented change of plans may disturb your budget. Credit cards allow the user to pay the minimum amount to the lenders in such cases. The minimum amount due is a small portion of the total outstanding card bill to be paid to the issuer if one cannot pay the entire outstanding bill amount. It is advisable to ask if interest will be charged for the whole amount utilised though you repay a certain outstanding amount. Find out the interest-free credit period the issuer offers.
6. Does the card feature any rewards?
Credit cards come with a lucrative reward system, usually in air miles, free fuel, cashback points and discounts based on the amount you have spent using the credit card. However, this varies depending on the type of credit card chosen. Hence, understanding the reward system can help you avail various benefits that come with the credit card. It is also best to clarify any doubts regarding terms and conditions and gain a thorough understanding of all fringe benefits of the credit card.
A credit card used wisely is an excellent instrument in building your credit history. It also helps you get lucrative deals on loans in the future, with dozens of choices available to you in the market. It is paramount to select the one that suits your requirements and budget. Understand the card most suitable for your lifestyle and financial health. Calculate what you need and choose the one that provides excellent offers.