The temptation and excitement of having credit card is much more for a person who has just started working and is going to own the first credit card of his life than a person who is applying for his/her 5th credit card or so. Irrespective of whether it is your first or fifth credit card, there are few things that have to be kept in mind while applying for a credit card.
Declare Your Income Rightly
A lot of people commit this silly mistake. The most important criterion for setting your credit limit is based on your income. If you are not projecting your actual income then it’s a big mistake. Some people inflate their income just to impress the credit card company.
On the other hand, there are people who also report reduced income figures with the hope of getting some advantage. Well, such instances will only leave you in an embarrassing situation, so never practice these things. By knowing your actual income, credit card companies will want to evaluate your repayment capabilities. Thus, misrepresentation of facts and figures will not get your credit card request approved.
Credit Card Usage
Before anything, you must know your intention with regards to the usage of credit card. You may wish to use your card for your regular expenditures or in case of emergencies only. If you would be using it regularly for all day to day expenses then you should consider having a card with good credit limit and attractive reward plans. However, if the use of credit card is intended only for emergencies then you can opt for no-frills card, which has lower rates of interest and fees.
Another important thing to ask yourself is whether you are planning to clear the debts monthly or will you carry it forward. If the answer is monthly repayment then you need not have to bother about the interest rates. A card without any annual fee and with longer grace period should work for you. But in case you plan to carry forward the balance then look for lower interest rates and reasonable introductory rate.
Do Proper Research
Never choose a plan or offer in hurry. You have to search for the best offers, but average offers will come in your way. The more time you will take to research and know in detail about the different products and offers, better will be the final takeaway. Always compare the credit card companies on similar grounds and then pick the wisest option.
Understanding the Credit Limit
Credit limit is nothing but the borrowing limit that the card issuer decides depending upon the information you have disclosed. They consider your credit rating and credit history while arriving at your credit limit. Never make false attempts to maximize this limit as it may lead to bad credit scores that will trouble you in future.
Know about the Interest Rate
Annual Percentage Rate, abbreviated as APR, is the interest rate on a credit card. This rate can either be variable or fixed. In case of variable rate, the interest rate is fluctuating unlike fixed rate where one rate is fixed until you get into tricky situations like late repayments or exceeding credit limit. Even the company can just change the fixed rate by one notice – they have the rights to do that!
Be Careful with Authorized User Cards
Authorized user cards are duplicate cards that can be handed over to your spouse, children or anyone you trust with your card. No doubt it is a very good feature. All expenditures from one card can earn you lots of rewards and cash backs. But be careful of the usage. You need to educate your authorized card holder to avoid any kind of undesirable situation. If you’re paying someone online, make sure they’re reliable processors.. Here is a list of some of reliable payment processing companies.
Penalties and Fines
Credit card companies will never leave a chance to make money out of your small or big mistake even though it’s a genuine one. It’s ironical that on one hand our credit limit is set and on the other hand there is no restriction as such in exceeding the credit limit. They will never block your card if you exceed the limit, but will shock you with good penalties. It’s always better to know about their fines and penalties.
Don’t Fall for Incentives
Many times people just get attracted to new incentives that the credit card companies offer and apply for credit card without even knowing their actual requirement. You should never fall into such promotional craps.
Terms and Conditions
This is the most crucial part that goes unseen most of the time. Fill up all the forms yourself and go through their terms, conditions and policies thoroughly.
Divya is a guest blogger who regularly contributes to many top financial sites. His sharp financial knowledge and awareness is commendable. Marco’s experience of 25 years in finance industry motivates him to educate people about financial matters.