There are many credit cards available; review your options to make a responsible decision.
General Information
Why do you need a credit card? How should you use it? Do you understand the costs that come along with a credit card? Are you able to pay the balance (owe money on past purchases) every month, or do you think you will keep a balance every month?
Answer these questions honestly before choosing a credit card. Everyone has different spending habits, so it is important to establish guidelines for yourself on how you will use it and what you can realistically afford to buy. Learning about common credit card mistakes gives you a heads up, helps you use your credit card correctly, and can help you avoid financial catastrophe.
A credit limit is how much money that the company will let you borrow. Credit card companies examine your credit score and your income to determine if they will approve your application and your credit limit. You could get approved for anywhere between a couple hundred dollars to thousands of dollars. If you reach your credit limit it can hurt your credit score.
Associated Costs with Credit Cards
There are fees attached to any credit card. There are sometimes fees for a simple transaction, cash advances, or making a payment over the phone. There are also penalties for paying your card late or going over your credit limit. Some credit cards charge an annual fee regardless if you use it or not.
Interest rates can vary on each card. Try to find a card that offers a low interest rate (Annual Percentage Rate or APR.) If you carry a balance on your card there is a finance charge. Each card identifies the minimum amount you are required to pay each month. It is in your best interest to pay more than the minimum payment. For example, let’s say you have a balance of $500 and your interest rate is 18%. If you only pay the minimum payment of $15, it will take you 4 years to pay off your debt, and an additional $200 will go to interest.
Resources
To find the article “Credit Card Help: The Ten Worst Credit Card Mistakes,” go to the webpage www.thebalance.com/worst-credit-card-mistakes-961138
To calculate the amount of interest you will pay on current or future credit card balances visit www.bankrate.com.
To compare credit cards and find the one that fits you, visit www.nerdwallet.com.