When used responsively, credit card can be a very useful financial tool with a range of benefits. It expands your purchasing power onto the online and phone purchases, it allows you to buy whatever you need even in foreign countries, it can bring you bonus points and rewards, and even improve your credit rating if you pay the card’s debt timely and in full. Still, before you apply for a credit card, there are some things you must know and reconsider in order to be sure that this is the right payment option for you.

Types of credit cards

First of all, there are different types of credit cards. You have general purpose cards, which can be used anywhere, for all types of payments and purchases. There are also private label retail cards, which are used only at specific stores, usually those who issued them. Most general purpose cards are are unsecured, which means that they are issued based on your credit rating and credit history, and they are not backed by any assets or accounts. On the other hand, there are also secured credit cards, which are baked by a deposit account in which you add the funds, and in case you default the payment, the card issuer is entitled to claiming the funds from that account.

Then, there are people who own a large number of credit cards and who are able to joggle the debt and pay everything on time. However, this is not suitable for everyone, and it is generally not recommended having too many credit cards, because it is difficult to keep track of the debt, and you can eventually spend more on interests than you have actually spent on card purchases.

Interest rates

Credit cards come with different interest rates, which you are obliged to pay if you are late with repaying the debt for the card. It can vary from 0% (for a limited period of time) to as much as 30%. Therefore, when choosing the credit card company, you need to be sure to understand all the requirements you need to fulfill and all the potential fees and interest you may be required to pay at certain conditions.

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It is also important to know that, when you apply for a credit card, you will be given the agreement you need to sign. It is legally binding as much as any contract, so you need to make sure to read it carefully before signing. The credit card agreement stipulates the following: the credit limit, the annual percentage rate, the method of interest calculation, whether the annual percentage rate is fixed or variable, the duration of grace period and all the fees you need to pay at certain conditions. Therefore, pay attention to these details not only before signing the agreement, but also before you decide to choose the credit card company to issue you the card. You should do so in order to be sure that they all work well for you and that you will be able to respect the deal.