Credit Card Basics You Should Know

When getting a credit card, you need to understand a lot of card basics things before you apply for one. Knowing how they work, what kind of payments are involved, what are the benefits, and the actual costs of carrying one. A lot of people are scared of credit cards and think that they are a scam.

This is because they’ve heard negative stores from other people’s experiences. However, the major reason for this is that most people don’t really get informed when getting a credit card. This is why we’ve decided to give you honest information about all the essentials that will help you understand all the benefits and potential downsides of using one.

5 Basic Reasons Why You Might Need a Credit Card

In case you don’t have a credit card at the moment, there are several reasons why you might want to get one in the future. Here are some of the most common reasons to own a credit card:

  • Cards offer a lot of different benefits like introductory APR with 0% interest, cashback, discounts, and others that might help reduce business costs.
  • In case you are out of cash entirely and have an empty bank account, a credit card can serve you well as a backup plan until you get back on your feet.
  • There are various reservations that can only be made using a credit card. Some examples include car rentals, renting accommodation, and so on.
  • There are also lots of purchases that need to be made exclusively via credit card. For example, you need a credit card to make online purchases and buy plane tickets.
  • They can be used for building a credit score. It’s possible to do this with other types of loans but having a single credit card makes the process a lot easier.
PRO Tip
Passing on a credit card might seem like a safe thing to do to make sure you don’t rely on loans. However, in modern business and shopping, there are too many benefits of using credit cards.

Basics about What is a credit card?

Credit cards are payment cards that allow cardholders to borrow money until they’ve reached the credit limit of the card. Cardholders use the card for transactions which are then added to the bill. An important thing to remember is that cards come with purchase interest if the holder is carrying a balance.

Simply put, if you are carrying a balance, you will get an interest fee on everything you buy. The interest percentage varies from one card to another. However, compared to other payment services, their interest rates are fairly high.

The payment history and credit card balance can both affect the holder’s credit score. Credit cards can be used for buying anything from meals, clothes, to home appliances. They are perfect for making instant purchases if you don’t currently have any money.

In general, here are 3 basics you need to understand about credit card:

  • If you don’t pay off your balance in 30 days, you will have to pay the credit you had and interest as well.
  • In general, purchases made with a credit card need to be signed with some exceptions.
  • Your credit card represents a line of credit that can be accessed by the cardholder.

Basics of Fees and interest payments that go with credit card

There are 3 ways credit card companies or issuers make basics money, including:

1. Fees: Annual fees and late payment fees.
2. Interest: When a cardholder is carrying a balance and takes it to the next month, they will get charges with interest on their balance or their purchases.
3. Transaction fees: These fees come with some credit cards. They might be fixed or percentage-based, and they are charged whenever the cardholder uses their card.

When it comes to standard cards, remember that carrying a large balance will simply eat up all the discounts or rewards you are getting. That’s why it’s important to make payments on time so that your card actually does what it’s supposed to.

PRO Tip
Interest rates are important, but not as much as you might think. If you pay your balance regularly every month, (which is highly recommended) you won’t have to pay interest charges at all. If a card has a low-interest rate, other unavoidable charges will be much worse.



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