7 Things Everyone Should Know About Credit Cards

Having credit is an important part of life. Having good credit allows you to purchase cars, buy houses, rent apartments, and take out loans. It can even affect your career prospects. Many companies run credit checks on prospective employees. When you are starting off building your credit history, it can be overwhelming and confusing. These are 7 Things Everyone Should Know About Credit Cards

Secured vs. Unsecured

There are two types of credit cards. An unsecured credit card has a limit set by your credit score and history. Secured credit cards require a deposit. Usually, the deposit will equally the available limit. These cards are easier to get for those with no credit history. After a while, the card issuer might reassess your credit and offer to make the card unsecured.

APR

Not all credit cards are the same. Shop around to find the card with the right attributes for you. Always check the annual percentage rate(APR). This is the rate you will pay in addition to your purchases. Credit cards APR’s can be as high as 30%!

Additional Fees

APR is just one of the fees credit cards charge. Many cards have an annual fee. Other charges are added for balance transfers, cash advances, foreign transactions, and more. Although a card having fees does not make it a bad choice, you must analyze which options are best for you.

Grace Period

Most credit cards have a grace period before they charge an APR. Typically, interest is not added when the bill is paid off each month. Paying as much of the bill each month as possible will save you money, and raise your credit score faster.

Credit Bureaus

Credit bureaus maintain credit information and supply it to lenders in a credit report. There are three big credit bureaus in the United States. They are Equifax, Experian, and TransUnion. The credit bureaus store information about the amount of credit you have, how much you are using, tax liens, bankruptcies, and more.

Credit Utilization

Paying off most of your credit card bill each month will not only result in lower interest but also improve your FICO score. Your FICO score is a three-digit number that is an average of all of your credit information. Utilizing a higher percentage of your credit card balance has a negative effect on your score. Therefore having two $1,000 limit cards carrying $200 balance is better than one $1,000 limit card with a balance of $400. The general rule of thumb is to try to use less than 30% of your available credit limits.

Try Pre-Approval Offers First

Applying for a lot of credit cards in a short time frame negatively affects your credit. Luckily, many credit cards offer pre-approvals. The pre-approval only runs a soft credit check, which will give you a good idea of whether you will be approved. After you have narrowed your search, apply for only one or two credit cards to start with.

Building credit can be overwhelming. Credit scores are complicated and have many rules. Being aware of and understanding these things will help you avoid the negative pitfalls of credit cards. Don’t worry though, before long, you will be a credit expert.

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