There are many reasons to have a credit card and there are many different credit card providers for you to signup with. Both my wife and I have credit cards that we use fairly regularly. Our credit cards cost us $0 in annual fees and have a 55 day interest free period for us to pay back and credit we rack up throughout the month.
Determining the Right Credit Card for you
Getting a credit card is quite easy, but getting the “right” credit card is another story. You need to find one that will suit your needs and that will provide you with the most benefits that you are likely to utilize. You need to work out how you plan on using your credit card, what you want to get out of having it and what type of limit you feel is going to cover your expenses.
One of the common reasons for people to get a credit card is for the many rewards programs that are on offer. Rewards can range from movie tickets to holidays and can really add up if you use your credit card to pay for most of your expenses.
Another popular use for credit cards is the cash back facility that is available from many of the credit card providers. This can be a great way to save a little bit of money when using your card to do things like grocery shopping or paying for petrol in the car. If you want to learn more about cash back please see this Wikipedia entry.
Credit Card Comparison
As there are so many different credit cards to choose from, it can be difficult to ensure that you do a robust comparison. Fortunately in the internet age you have access to online comparison sites like Totally Money or even a google credit card comparison search. Sites like this do all the leg work for you and can show you up to date comparisons of all the major credit card providers and their latest offerings.
Credit Card Gotchas
Obviously there are some major gotchas with credit cards that you need to be aware of. Things like:
Most credit card companies will load you up with as much credit as they can in the hopes that you will use the card and end up having to pay interest on the money that you have borrowed. This is after all how they make the bulk of their revenue. My recommendation is to set your credit limit at an amount that you feel you are able to pay back within a month. You don’t want to go off and spent tens of thousands of dollars only to have to pay it back at a high interest rate.
Check out the interest rates on the cards carefully. Many of the cards will offer sweetheart deals for the first year like “Interest rates from 1.5% PA”. Then in the small text at the bottom of the product disclosure statement there will be a reference to the interest rate converting to the standard rate of 15-20% after the first year. This gets so many people suckered in and so it is important that you read everything about the card carefully, and fully understand what you are signing onto.
Many cards come with fees. These fees can range from yearly fees, overdrawn fees and late payment fees. Check out the fee schedule before signing up as these fees can make some credit cards get very expensive.
Interest Free Period
All credit cards will offer an interest free period. Most of the ones in Australia offer 55 days interest free, this means that we have to pay back the entire amount of credit within 55 days of using it. If you don’t, then you will have the interest added to your bill. It is important to know how many days interest free you get and to try your best to always pay back that money before the credit card companies get a chance to add interest on top.
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