Applying for and receiving your first credit card can be a thrilling experience! Several cards are available that come with their own set of features and advantages. It's similar to looking for that perfect pair of jeans or t-shirt, or that perfect shade of lipstick or eye-shadow. It necessitates careful consideration of numerous brands, features, and costs.
What Is A Credit Card?
A Credit Card is a form of credit that allows you to borrow money from a bank under certain conditions. You can use a credit card to pay for purchases at merchant establishments as well as online purchases. During an emergency, you can also withdraw cash from an ATM.
- Credit cards are convenient to carry
- Most merchants across the country accept a credit card
- Credit cards reward programs are an important criterion while shopping for a credit card
- Pay attention to the APR and other charges associated with your credit card
A credit card has a monthly credit limit that you can spend up to each month. The amount you owe is deducted from the limit, which is changed as you settle the debt. You will be charged interest on the outstanding balance if you do not pay the entire bill.
Numerous factors affect your credit card eligibility. You can read more about credit card eligibility on the CreditMantri website here.
How Do Beginners Generally Use Credit Cards?
The major part of credit card purchases is towards extravagances like eating out, shopping for clothes and accessories, buying the latest gadgets, and movies and entertainment expenses. A new credit card gives a sense of financial independence to youngsters who can now spend as they like without the watchful eye of their parents.
Tips For First Time Credit Card Users
It's exhilarating to get your first credit card and the sense of financial independence that comes with it. However, many people overlook the fact that getting your first credit card is an important step in building a strong financial future and a high credit score. Unscrupulous credit card use, if left unchecked, can result in a massive debt that will take years to settle. While it may be tempting to flash your card wherever you go, there are a few things you should keep in mind if you don't want to end yourself in debt.
1. Do not spend more than what you can repay: Experts recommend that you keep your credit utilization percentage below 30% of your income. This is a healthy amount that allows you to comfortably handle your credit card debt. Keeping huge sums on all of your credit cards could hurt your credit score. Furthermore, if these large sums are carried over from month to month, your interest expense will climb.
2. Keep track of your bills and pay them on time: Know your billing cycle and due dates. Make sure you don't miss payments. The interest rates on credit cards are among the highest. If you don't pay your bill on time, interest will accrue and your payment amount will increase. So, if you don't want your interest outflow to climb and your credit score to plummet, make sure to pay your payments on time.
3. Don’t pay just the minimum amount due: Paying only the minimum amount required is insufficient because it will result in interest charges. This is a poor debt management strategy that will result in significant credit card debt. Pay no attention to the minimum amount due and make it a priority to pay off your entire credit card bill each month.
4. Never use your credit card to withdraw money from an ATM: Unless necessary, avoid using your credit card to withdraw cash. It can turn out to be quite expensive. For every cash withdrawal made using a credit card, a cash advance fee will be charged and is usually a percentage of the withdrawn amount. Banks normally charge 2.5% to 3% as a credit card cash advance fee, with a minimum of Rs.300 to Rs.500.
5. Evaluate the annual and joining fees: Credit cards frequently charge yearly and joining fees. Pay close attention to the cost structure and only choose a card with reasonable fees in comparison to the benefits it offers. You may be entitled to a fee refund if you use your credit card for more than a certain amount per year. By taking advantage of such incentives, you can save money on annual fees.
6. Take advantage of your rewards program: Many credit cards offer new member incentives or reward programmes. Gift cards, free airport lounge access, and other incentives or awards can be redeemed for these incentives or rewards. Redeem your reward points on schedule to get the most out of your credit card. You can even use your reward points to get cashback on your card with many cards. That is also a viable alternative. Fuel cards are especially useful for car owners who have a large amount of their credit card account dedicated to fuel. So pick a card that will reward you the most for your usage.
An interesting read for you: Credit Card Reward Points
Paying for your purchases, whether at your neighborhood shop or online, with a credit card is very convenient, instant and economical. You can profit from interest-free credit, various perks, and cash-free living if you use it wisely. Credit cards outperform debit cards in terms of reward points and the ease with which they can be used to make transactions even when funds are limited. Take the time to understand the fees, interest rates, penalties, and incentive system linked with your credit card if you're a first-time user. Finally, before you sign to that card application, make sure you've done your homework and compared different credit card options on the internet to find the best card for you and your lifestyle.
FAQs of How Do Beginners Use Credit Cards:
- Even if I pay the minimum amount due on my credit card account, will I be charged interest?
Yes, paying the minimum amount due will avoid late fees, but you will still be charged interest on the unpaid balance.
- How many days of interest-free credit is given for the withdrawal of cash from an ATM using my credit card?
In reality, there is no interest-free period for cash withdrawals made with a credit card. For cash withdrawals, interest is charged from the first day until the day of repayment.
- What is the annual interest rate on credit cards on average?
Interest rates on credit cards range from 48% to 60%.
- What is my credit card's credit limit?
Your credit limit is the maximum amount you can spend on your credit card. Your credit limit is determined by several factors, including your age, income, credit score, and a few more. The welcome letter that comes with your credit card will state this.
- What is the age requirement for obtaining a credit card?
Most banks only provide credit cards to people over the age of 21 but in recent times, people over the age of 18 can also get a credit card. Check with your bank on age eligibility.
- Is it possible to get a credit card with no annual or joining fees?
Yes, there are numerous credit cards available that have no application or annual fees. Before applying for the card, check with your banking about this.
- Is a credit card with a rewards program or one with cashback better?
This is entirely dependent on how you want to use it. If you enjoy shopping, a rewards program will be beneficial. You can exchange your points for fantastic merchandise. If you don't do much purchasing or buying, the cashback card is a good option. For high-value purchases, you might be able to obtain some amazing cashback deals.