Credit cards have a bad rep – many people assume that credit cards will lead them to a mountain of debt. But, that’s not true. As long as you understand the fundamentals of how they work, you’ll be able to use them the way they were meant to be used. Here are 5 things that you need to know about credit cards.
There Are Multiple Types of Credit Cards to Choose From
Did you know there are various types of credit cards that you can pick from? People who have an unreliable credit history can apply for a secured credit card, while people who have excellent credit scores can consider applying for rewards cards. If you already have a few credit cards with outstanding balances, you can save a lot of money on interest charges by getting a balance transfer credit card.
There’s No Perfect Number of Credit Cards You Should Have
While it’s best to avoid applying for every credit card you get offered (since it will negatively impact your credit score), keep in mind that there is really no specific number of credit cards that are considered good to have. A few general-purpose cards will suit most people’s needs.
You Need to Understand the Rates of Cards
Interest rates on credit cards can vary dramatically – starting from as low as 0 percent to as high as 30 percent. Credit card companies use a number of factors like your income, credit score, assets, credit inquiries, economic conditions, payment history, and more to calculate your credit score. People who have a strong credit history typically receive the best rates.
It’s Important to Compare Cards
Banks, credit card companies, retailers, and credit unions issue credit cards. Ideally, you should apply for a credit card only after you compare the rates and terms of a few different credit cards online.
Your Credit Card Contract Is Binding
It’s important that you read your agreement carefully, because once you sign up for a card, you form a legal contract with the issuer, and agree to all the terms and conditions on the document.