I used to be terrified of acquiring a credit card. Credit Cards Explained Simply put, it looked like I would unavoidably accumulate debt because borrowing money was so simple. Credit cards may actually be a very useful financial tool if used wisely. They can help you invest in life’s more expensive products, give more security to your payments, and even help you qualify for a mortgage. This article will explain how credit cards operate, the benefits and drawbacks of acquiring one, and How To Apply Online if you’re interested in learning more.
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What is the purpose of a credit card?
There are three important things to think about if you’ve never used a credit card: what credit is, when to pay it back, and how to control or even prevent paying interest. You don’t use your own money when you pay for something on credit, such as with a credit card. Instead, you utilise money that you must eventually repay that you borrowed from a bank or another provider. The billing cycle of your card will determine when you must pay back the money. Although this usually occurs on a monthly basis, your precise payment date may not fall on the first or last day of the month, so you’ll need to check with your provider to find out. Your bank will compile all of the transactions you’ve made over the course of each cycle and give you a bill; this is your credit card statement. After receiving your statement, you must choose how to pay your bill. You have three options for making a payment: the full total, the minimum amount required by your bank, or something in the middle. Your bank will charge you interest for letting you borrow money. Your Annual Percentage Rate, or APR, is determined as a percentage of the loan amount and varies between cards and service providers. You must at the very least pay the minimum amount due each month to avoid incurring interest fees on the unpaid balance. You should pay off the entire debt each month to prevent paying interest. It’s important to remember that many suppliers also impose an annual fee for using their credit cards.
Advantages and disadvantages
Your credit score could be increased by using a credit card. A credit score is a number that indicates to lenders your level of reliability while handling their money. Ideally, you are a better borrower if your score is greater. Numerous advantages, such as reduced loan interest rates, insurance savings, and more affordable mortgage possibilities, can be unlocked by having an excellent credit score. You may purchase pricey products easily with credit cards instead of carrying large amounts of cash or moving funds between several accounts. Instead of a gold-plated tea kettle or a Faberge egg, these things should be investments like a new washing machine or a car. Credit cards now provide extra protection for your payments in case of trouble thanks to the Consumer Credit Act. Some credit cards also offer incentives, so every dollar you spend results in the accumulation of air miles or points that may be used to purchase delights in the future. However, if used improperly, a credit card may be a fairly simple method to accumulate debt. So, if you tend to blow your budget and overspend, you might want to reconsider whether a credit card is the appropriate choice for you. Credit cards have credit limits and are not free money. Be warned that even applying for a lot of credit cards can result in fees for ATM withdrawals from some credit card companies.
What to do to apply online
There are loads of credit cards out there, so the first step is to do some research and compare which card would work best for you.
- Once you’ve picked one, the next step is to apply online. It shouldn’t take more than 15-20 minutes, but be sure to answer every question honestly.
- At this point, the lender will run a hard credit check, and come back to you with either a rejection or a proposed agreement which you should read carefully, sign, and return if you’re happy to proceed.
- Once all the serious admin stuff is out of the way, the lender will separately send you over your card and pin.
- You’ll need to activate the card before you can use it which can be done over the phone or online, depending on your provider.
The first time you use your card you’ll need to key in your pin, after which you can simply tap your card for contactless payments. And now you’re ready to go! If you’ve never had a credit card before you may only be eligible for a low credit limit. But, by using your card responsibly, you’ll build your credit score until you’re able to apply for an increase or even get a better card.
THE NEXT STEP?
Hopefully, you now understand a little more about getting your first credit card. As always, for more in-depth information check this:
