Apr 06, 2017

Credit cards provide you with the convenience of spending even when you don’t have the moolah. They help you build your credit score, which you can flaunt like a badge in front of your loan providers, mortgage providers and auto car financiers.

Fact is, having those rectangular small pieces of PVC in your wallet can be tempting but you really need to understand few things before applying for one.

The Aum Meditation – Spiritual Awakening!

The most important thing that you need to understand before getting a credit card is, first understanding yourself and your needs. You have to establish why you actually need a credit card and does your budgeting allow you to afford one.

Some of us want to have a credit card as it helps cater the circumstances that we have not planned for. And let’s be honest, anyone of us can have those uninvited guests in life. But then, is it really wise to get yourself into credit card debt just because you think you may have an unexpected expense in the future?

The bottom line is, you should be perfectly aware of why you would need a credit card before applying for one.

Building the Credit History

Credit cards are seen as an important tool towards building your credit score. Having a healthy credit score can help you apply for mortgages, personal loans etc. But one thing that we all underestimate is the fact that you don’t only need to have a credit card to build your score, but you also need to be regular with monthly payments. 

You don’t want to end up as a defaulter with those credit card monthly payments, as this could actually end up damaging your credit file. A double edged sword!  

The Mirage 

What you are initially being baited with is not always what you will end up getting with your credit card. For instance, the APR on the brochures and advertising campaign won’t be the same which you are actually being offered. 

Similarly, some of the credit card providers would focus more on the interest rate during the negotiations, which excludes any additional charges or penalties that you would actually be paying with your monthly payments. 

There are probably thousands of such ways which the provider can use to initially blind you and therefore it is important that you read the fine print of what you are actually applying for. If you have any confusions or questions, discuss them.

Don’t Fall Into the Points Trap

Some people get a credit card simply to utilize the rewards that come with it, while others who don’t could still be tempted by the reward points they offer. 

Where there is no harm in using these discounts and freebies, you have to understand that usually there is a spending score that is set for you to actually get your hands on these rewards. If you are not careful with your spending, you may end up exceeding your budget.

Fixed it is!

When applying for a credit card you will be told about the fixed interest rate. The fixed interest rate that you are being offered, around which you would be planning your budget, may remain fixed or it may change depending on your provider. They have every right to change it and all they need is to notify you.

Maybe you had enough of your friends flashing their credit cards at you and you have finally decided to have one of your own — but it would be better if you understand first what you are getting yourself into.

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