Credit 101

by Matt

in Top Credit Cards

Before you get a credit card you should consider the risks that can be involved, especially if you do not have a lot of income.  There are quite a few things you need to consider before you go and sign up for a credit card, otherwise you could be setting yourself up for failure and hurting your credit score.  Not to mention reversing credit score damage can take years and years making you pay higher interest along the way simply because you did not consider the risks of credit before enrolling.

Credit is not free money. Often when someone gets a credit card for the first time they feel as though they have “free money” because there is no immediate payment for your purchases.  Next thing you know they are racking up quite a balance that they can not afford to pay off.  Now those purchases that you paid for are costing you more because of the interest they are adding up due to not paying off your balance.

Monitor your credit score. Many people have credit cards opened in their name and don’t even know it. It is very hard to know if someone has stolen your identity and racking up credit on your behalf, unless you monitor your credit. I am signed up for a credit monitoring service that will alert me when anything changes on my report. If my score or a new card is opened, it will let me know so that I can take action and make sure my credit isn’t ruined for life. I highly recommend checking your report every once in a while just to make sure you aren’t being taken advantage of. If you want to use the same agency I do, then check out IdentityForce.

High interest rate.  Before you sign up for a credit card, take a look at the interest rate that will be charged if you do not pay off your balance.  This is often overlooked for new credit card holders because they either do not understand when interest will be paid or they believe they will be able to pay off their balance every cycle.  Regardless of your situation you need to still look at the interest rate.  Do not get pulled into a card for its “rewards” if it charges a hefty interest rate.  Most of the time, the rewards are not worth the risk.

Annual fee and misc fees.  Today’s world of credit it is very common to see many no annual fee credit cards.  These are the cards that you should apply for.  If the card you are interested in charges an annual fee it may be worth exploring other cards.  Aside from an annual fee it is good to look at the other fees they charge because you do not want to be blindsided by a fee that could have been avoided if you did some basic research.  Miscellaneous fees could be denied payment fee, returned check fee, foreign transaction, and even worse, reward redemption fee.  If you are being charges for redeeming your rewards, look for another card.

Before getting your first credit card or a new credit card it is best to do some basic research and fully understanding what you are getting yourself into.  Credit companies are infamous for hidden fees that can add up to make a big difference. Don’t be another casualty, read the fee structure of the card and make sure you are not ripping yourself off.  Remember, credit cards are not free money and they can come back to bite you if you are not careful and considerate of the risks that are involved.  Your financial future can be strongly decided by actions that you do today, be cautious.

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{ 1 comment… read it below or add one }

LindseyNo Gravatar October 21, 2012 at 11:59 pm

Excellent article on credit 101. It hit home when you said that credit is not free money, someone has to pay for it at a cost. Responsible spending is the key. Thanks for sharing your ideas with the world, you make the difference.


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