How to Find the Right Credit Card for You
We happen to live in a society where your financial credibility is based on your ability to handle credit. Whether you’re buying a car, taking out a mortgage, or even renting an apartment, your credit history plays a big part in how far you can go. Rather than getting caught up in a vicious cycle, educate yourself on the credit game and get ahead on your finances.
How Credit Works
We all know the basic concept of a credit card. With one swipe of a shiny piece of plastic, you automatically borrow X amount of money which you must pay back. Of course, the speed with which you pay it off will determine how much you owe. For instance, if you wait too long, you will most certainly get slammed with high interest rates.
But did you know that your credit plays a key role in determining your financial future?
How Credit Runs Your Financial Life
That’s right, your credit score basically runs your financial life. If you have shown that you are good for your money, meaning that you pay your debt in a timely manner, you will have a much easier time getting a car loan or a mortgage. If, however, your credit history shows some irresponsibility, you may even find it difficult to rent an apartment. Also, the better your credit score, the less interest you will pay on big ticket items like a mortgage.
Finding the Right Credit Card
Because of the aforementioned points, it’s more important than ever to make sure you get a credit card that will work for you rather than hurt you. Please remember that you typically don’t need more than one credit card. This will save you a lot of headaches when playing the credit card game.
Secured Credit Cards:
These kinds of credit cards are for those of you who either don’t have a credit score, or your score is so low you don’t qualify for a credit card. Secured credit cards look and feel like the real thing, but you can’t exceed the amount of cash you put into it ahead of time through the card company. This is a great way to start building good credit or just improve your score.
Student Credit Cards:
Student credit cards are a great way to start building credit while away at university. They typically have very low credit limits and can even be capped off so that you do not exceed a certain amount. Furthermore, you can find student credit cards with lower interest rates than most credit cards.
Bank Credit Cards:
Credit cards acquired through a bank typically have lower interest than those acquired through other means. They also link seamlessly to your checking accounts for easy planning and easy payments.
Avoid Retail Credit Cards
Retail credit cards are a marketing trap. Sure, it may seem like you are saving an extra 15% off your purchase, but if you don’t pay off the card you can see enormous interest rates upwards of 24%. Not only did you not save your initial 15%, you also just dug yourself into a deep credit hole.
Credit cards don’t have to be evil. It simply takes a little education in order to pick the card that works best for you and your finances.
Image by A Long, Lone Run
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I heard that after the S&P downgrade of the US, getting a credit card may get tougher. Is it true?
That’s an excellent question, Karan. Now that Standard & Poor’s has downgraded the USA’s credit rating from AAA to AA+, a lot of people are wondering how it will affect them. The answer is that getting a credit card will still depend on your individual credit score as determined by the credit card provider; however, interest rates are likely to increase in the US, so the card you get may cost you more.
Bear in mind, though, that the other 2 major credit rating agencies, Moody’s and Fitch, still rate the USA at the top level, so S&P’s rating isn’t the only expert opinon available and the USA is still very highly rated across the board.