Credit cards are tempting, however getting close to it, you can probably get burnt. Nevertheless, without a credit card, it is difficult to build or establish credit with which you can make large purchases. If you choose to live without a credit card and a credit score, you have to jump potentially through a number of hoops. Perhaps, choosing the right credit card can better organize your spendings and credit situation.
Picking The Best Credit Card
Like any other American, you would have probably bombarded with a multitude of credit card offers from a number of banks and retailers. Although there is a number of options and offers, you would finally end up with a credit card that is issued from your home bank. Nevertheless, choosing a right credit card is a combination of art and science. Shopping the right credit card will save you hundreds and thousands of dollars to your credit wallet in terms of interest and surcharges.
While choosing a credit card, you should know for which reasons you would require a credit card. Your purposes can vary from buying things online or paying your bills or making bigger purchases. Apparently, you should also determine whether you would be able to make the repayment every month for your purchases. Exceeding your limit will put you in hassle, and you would be spiraling in debts. However, when you have the potential to repay your bills in full or stick on to regular payments, you can even take advantage of the interest-free period.
To make a well-informed decision, this article would help you find the best credit card for you with some useful tips
Annual Percentage Rate
The most important loan term is your interest rate stated as a yearly rate, which is the rate, you will be charged for borrowing the money. Individuals, who are applying the credit card for the very first time will not consider this factor.
So, they usually tend to pay high-interest rates. If you are applying the credit card for the first time, you probably might carry a balance to the following months, so the most important aspect that has to be kept in consideration is the interest rate. Even carrying a few months of balance will cost you hundreds in interest charges, so lower the interest rate greater would be your credit card experience.
Check Your Credit Scores
Check your credit scores and determine the credit card offers. A credit score is a three-digit number, typically between 300 and 900 that relates to how likely you are to repay debts. Credit scores are very sensitive to credit report enquiries, so you should avoid applying for random credit cards.
There are online tools that will help you to provide a list of credit cards based on your credit scores. If you are not aware of your credit score, you can get an estimate of what is your score using the credit score calculator, which will require several pieces of information like payment history, the amount owed, length of history, new credits, types of credit and few others.
Determine Your Minimum Payments
Most credit cards only require you to make a minimum payment every month which is basically 20 – 25 $ based on the interest of your credit card. This payment is required to avoid late payments and damages to the payment history. There are few methods of calculating the minimum payment
- Percentage method – Some lenders calculate the minimum payment as a percentage of the balance. For example, your minimum payment is 3 percent, and you owe 1500 dollars then your minimum payment is calculated as 1500 * 3/100 = 45 $
- Percentage and applicable interest + finance charges- The credit card issuer will also take a percentage of what you owe along with applicable interest and finance fees at the end of every billing cycle. For example, when your minimum payment is 2% for 1500$ you owe. If the applicable interest is 10% and there are no fees involved, then your minimum payment is calculated as (1500 *0 .02) + (1500*0.1) = 45$
Choose The Credit Card Which Will Serve Your Purpose
There are plenty of credit cards out there, but the best credit should be the one which would satisfy your needs. For instance, if you are a frequent traveler, you should certainly go for the travel rewards credit card which can save some percentage on interest for every spending. Low-income families, who have potential chances of carrying forwarding their balance should look for low-interest credit cards to avoid paying high interest rates for the balance amounts. However, when you are looking to improve your creditworthiness, you can go for secured credit cards that are backed by collateral. This would probably add more value to your credit scores.
In addition to these aspects, look for the nuts and bolts to avoid getting trapped to the faulty providers who can ditch you in bankruptcy. Also, don’t forget about the additional benefits and bonuses to have a great experience with credit cards.