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First time credit card user things to know

Thursday Feb 18, 2010

First, you have to decide why you want a credit card. Are you wanting a credit card to build your credit or do you just want to purchase things that you don’t have the money for?

The smartest reason to have a credit card is in case of emergencies or to build your credit. If you don’t have the money to purchase things, you might fall behind on your payments. So if you want that new pair of shoes that you can’t afford and you don’t pay your bill in full right away, you are going to be spending more on those shoes than they were worth.

A couple of things to look at when applying for a credit card:

Interest rate: You want to find the lowest interest rate possible. Interest rates can jump 15-20% after the introductory period. If you don’t find anything lower than an interest rate of 15%, I would keep looking around.

Cards without an annual fee: There are so many credit cards on the market that don’t charge you an annual fee to have the card. Sometimes you’ll see that a card will have an annual fee but they’ll try to lure you in by giving you rewards. Keep looking. You can find a card that offers rewards and won’t require an annual fee.

Rewards: Since so many cards now offer some kind of reward, it would be silly not to choose that kind of card. The best deals are on the cash back cards. The more you spend, the more you’ll get back. You can also find cards that offer airline miles or gift cards to hundreds of shops, restaurants, hotels, etc.

Penalties: Make sure to research all information that is associated with credit cards. It’s important to realize that you can easily be penalized and rack up fees, if you aren’t smart. Banks can raise your interest rates after one late payment. Not to mention you’ll also be charged a late fee. If you go over your balance, you’ll get an overbalance fee and your interest rates can get raised. These interest rates can go as high as 30%.

Limit your number of cards: It is ideal to have 1-2 cards and typically you should not have more than that. The more you have, the more overwhelmed you can become which can force you to miss payments or spend a lot more with interest fees.

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