11 Things You Should Know Before You Get Your First Credit Card

1 –  A Credit Card Is Not A Debit Card

A credit card is not a debit card.  It functions totally differently.  With a debit card, you have funds in your account. When you use your debit card, the amount you spend gets deducted from your account.  A credit card is like taking out a short-term loan when you charge it.  You can charge your credit card up to a pre-determined limit and you have to pay that amount back every month.  If you don’t pay it back in whole every month, you will be charged interest.

2 – Two Types Of Credit Cards

There are two types of credit cards: secured and unsecured.  Secured credit cards require that you put down a cash deposit. Secured credit cards are great options for people with bad or no credit.  The credit limit is usually determined by your cash deposit.  Unsecured credit cards do not require a cash deposit. Your limit is determined by your credit card history and income.

3 – Nonstandard Fees

Nonstandard fees are not typical for credit cards.  Make sure that you are not charged with conversation fees, quarterly technology fees, audit fees and security fees.

4 – Annual Percentage Rate (APR)

You should always check the annual percentage rate (APR) before you apply for a credit card.  This is because the annual percentage rate is what you will have to pay if you don’t pay your full credit card balance when it is due.  Some APR’s can be as high as 30%.  Make sure to read the fine print and find the APR before signing up for a credit card.

 5 – Pay More Than The Minimum

If you pay only the minimum payment on your credit card every bill cycle, you may never pay off your credit card. Also, you will have to pay interest on the remaining balance whenever you don’t pay off your card.

6 – Why You Should Get A Credit Card?

Many people think that you should get a credit card to make purchases.  The truth is that with a credit card, you can build a good credit score, which can help you save money on lots of big ticket items.  These big ticket items include car loans and mortgages.

7 – Annual Fee

Having to pay an annual fee for a credit card is unnecessary.  Annual fees can cost about $100 – $300 per year. Make sure you read the fine print because not all credit cards have an annual fee.

8 – The Contract Is Binding

When you sign up for a credit card, there is no wiggle room in your contract.  You cannot negotiate your interest rate if your payment is late.  This is why you need to make sure that you are comfortable with all the terms and conditions in your contract.

9 – Benefits

A lot of credit cards come with benefits.  Some of these benefits include points for airfare and hotels. and cash back on certain purchases.  You should make sure to fully understand your credit card benefits before you sign up for a credit card

10 – Sign Up Bonus/Introductory Offer

A lot of credit cards offer a sign up bonus or an introductory offer.  Some offer cash back upon opening a card, points, or miles during the first three months as a card holder.  You may also receive a zero percent APR offer for purchases.  These offers are great, but once again make sure you read the fine print.

11- Always Make Payments On Time

Making payments on time is very important.  If you do not make a payment on time, you will be penalized with a late fee.  If your payment is more than 30 days late, your credit score will most likely drop.  To make sure you make your payments on time, set up reminders of when bills are due.