Credit cards are a great way to conveniently pay for just about anything. When used properly and paid off on time every month, they show other lenders that you are responsible with your money. However, if you have never used one, there are a few things you should know about credit cards.
What is APR?
APR is an annual percentage rate, which states the amount of interest charged per year on your credit card debts. While some rates are competitive, it’s worth bearing in mind that applicants don’t always get the same rate.
Most lenders will offer you APR after an assessment of your credit rating. Those with anything less than a squeaky clean credit rating won’t be applicable for the typical rates and will be offered higher interest rates.
If you have a poor credit rating, you will have to pay an even higher rate still. In many cases, lenders will refuse to lend to you at all if your credit rating is too poor.
You need to make at least the minimum payment on your card at the end of each month or you will have to pay an additional late payment fee. Of course, the goal is to pay off your credit card in full so that you don’t get into debt!
Also, it’s not that late fees are high, it’s that every late payment shows up on your credit rating and can reduce your chances of working with other lenders in the future.
When you move a balance from one credit card to another, you are charged a transfer fee. The charge is usually issued as a percentage of the amount which is being transferred. Sometimes the transfer fee is worth it if it will help you to pay down your debt, but don’t transfer too much since you don’t want to have too many open credit card accounts.
Your Credit Rating
Keeping your credit rating high is incredibly important, as it greatly affects your future applications for credit. If you have bad credit, it’s not always a good idea to apply for credit cards as repeatedly rejected applications show up on your credit report.
The Most Important Thing To Know About Credit Cards
Credit cards are a tool that you can use wisely and to your advantage. They unfortunately don’t provide free money, and you have to pay it back! The best way to stay in control of your credit cards is to manage your money well. For example, a spokesperson from Yorkshire Building Society, a leading company in the financial industry, offered this advice: “Set up a regular savings account and shop around to make sure you get the best rate…Review your day-to-day spending to see if you can make any cuts to increase you’re saving; then set up a budget for essentials and stick to it.” I couldn’t agree more!
Have any questions about credit cards? Ask them in the comment section below!
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