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Everything You Need To Know About Credit Cards!

credit cards
Different people have mixed feelings and opinions about credit cards. Others do everything with it, while others can't stand the thought of it. However, how it helps or harms you depends mainly on you since it's just a tool. It can be dangerous for you if you don't know how to control yourself.

What are credit cards?

It is a piece of plastic that's rectangular, a metallic alloy, or graphite that's connected to an account. Some cards might contain an RFID chip, but each one has a magnetic strip. If you're an owner, your name and account number might be imprinted on it.

A customer will use the card to pay for services or products using a bank's money, then repay it later. Just like a loan, the money used will have to be paid back with interest. It might be a problem in the future if you use the money and you aren't able to repay it.

How do they work?

When you need to purchase something or pay for a service and you decide to use your card, the information is verified and the cashier or merchant validates if the bank will allow the transaction. When all the information is correct, the transaction goes through, and the whole cost is added to the card.

The retailers pay to be able to accept the cards, while banks that issue the cards receive part of the amount as revenue. You receive a bill of all the accumulated transactions through your card from your bank.
The best way to deal with this is to pay it all off immediately. If you don't, you'll pay extra fees decided by your bank.

Interest is also added if you fail to make the payment to the amount you owe your bank. This is dangerous because the interest rates go up so quickly. When you make your payments on time, your credit rating is upheld. This helps you if you want to borrow money from other companies in the future.

What you should know before applying for one.

The following are the important things you should know before getting one.

● Every month you'll need to make a minimum payment. You should set up a Direct Debit for what you can afford to repay. This helps you not to miss payments.
● When getting the card, your provider will conduct a credit assessment. If you have a good credit rating, your chances for a successful application are higher.
● Some cards require a minimum age of 21, but you need to be at least 18 to apply.

Pros of credit cards.

● You get to buy now and pay later. When you don't have enough money to buy something you can still get it with your card.
● Convenience. They're easy to carry around and use anywhere. They're accepted in a lot of places than other cards like prepaid cards.
● Safety. You get more security than when you use cash. You can just report if it's stolen and it will be canceled by your bank. If any money is used you're most likely to get it back.

Cons of the cards.

● Extra fees. Apart from the interest you're supposed to pay, you might end up paying more money. This might be for exceeding the credit limit or even a late or missed payment. You can also pay extra fees because of using a cash machine.
● Costly. It can be expensive when you have traveled abroad and try to use it. The fees can be high.
● High-interest rates. You'll end up paying interest at the end of every month for your pending balance. The interest rates tend to be high and not as low as a personal loan. You can easily get in debt if you keep using your card and not paying.

What to consider when choosing a card.

● Annual fee. You might be charged for use of your card at the end of the year. If you have a balance due, the fee is added to it and your interest.
● Annual percentage rate (APR). This involves the cost of what you borrow on the card. Compare different cards to choose the one with the best APR.
● Charges. You're charged for late payments, exceeding your credit limit, and using the card abroad. Find out what charges apply.
● Introductory interest rates. You start by paying lower interest rates then it ends up increasing. Know how long it will last and the interest rates after.
● Minimal repayment. You pay a minimum repayment when you don't pay off your balance every month.
● Cashback. This is the money refunded back to your card. It depends on the amount you've spent. You might qualify for the cashback or not.
● Rewards. You can get loyalty points from spending money. You'll have more when you spend more. You can use the rewards to do a lot, like buy new things. You should check whether or not you qualify or not.