Between looking for the best option and learning about all the hard consequences it could bring if don’t use it correctly makes getting a credit a very stressful experience.
Here we share some information that can be useful in case you’re considering getting your first credit card.
First of all, it is important to know what a credit card is. Credit cards were created to be a payment method and not a form of debt.
They work in a very simple way…
You don’t have an account with your own money. Instead, the bank or credit agency pays for your expenses at any store or business. Then, every month or 45 days you pay them to cover this expenses. Many cards offer this service without charging any extra fees or taxes as long as you pay the “minimum payment ” within the first 20 to 45 days. Because of that, I recommend you to ask your credit agency about extra fees, taxes and estimated monthly percentage to be paid before accepting the card.
Another important thing to know is how interest is calculated. Some banks or agencies charge small interest rates but some have really high rates and this is why you should contact your agency and ask how much interest will you pay and also if there is any other fee, like a membership fee for example.
This is what you need to know before start spending money with your credit:
- It is possible to give a minimum payment, as I mentioned before, but this is not advisable at all. You can pay each month a minimum amount without damaging your credit history or being charged with a late payment fee but as good as this sounds there are several things against this; to begin with, you could be charged extra interests if you don’t pay the full amount and with this, your debt would increase each time more and more turning into an awful debt that could damage your credit score. The best thing to do is always pay the full amount you owe.
- There are many fees you could be charged for when you use credit cards, like: annual fees, balance transfer fees, foreign transaction fees, late payment fee and over the limit fee. You should be very careful to ask about all this to your credit card provider before accepting the service, because as helpful and important as it can be, credit cards can easily turn into a nightmare if you don’t learn about its cons, pros and correct use.