Well, every one of us invariably has a Credit Card. But how many of us actually stop to think whether it is a saving angel or a devil in disguise. Not many :) . The truth is - it is a double edged weapon - if you are clever and master the game, Credit Cards can be the saving grace. But on the other hand, ignorance mixed with a few goof-ups here and there can result in half your paycheck sliding stealthily into the bank's pockets.
So the advice for the day is - Be aware and play the game sharp. I have three credit cards and one fine day realized that I was paying exorbitantly out of my pocket for two of the cards. Finally decided to dig deep and see how they actually work.
Here's an interesting article I came across - it explains every thing a person should know and should keep in mind before apply for a credit card.
http://www.federalreserve.gov/Pubs/shop/
A few tips
Though I should put in my two cents on understanding credit cards. The biggest advice - PLEASE READ THE FINE PRINT - in fact, the fine print ain't so difficult to comprehend. In fact, as explained in the article above, every credit card company is required to explain all the essential facts (like APR, balance transfer, cash back, basic rewards, APR calculation cycle, etc) in a standard table in the 'terms & conditions' page. So the simple rule is - Learn what they imply and read the fine print.
Secondly don't blindly choose a credit card - play it smart. Every credit card has a lucrative offering based on the type of card. Some of the common types
- Zero/low intro APR
- Zero/low balance transfer
- Cashback rewards on purchases
- Gas cards
- Airline/hotel points cards
So play a clever game. Eg. choose a card with zero intro APR and use it extensively for 12 months and help to eliminate/minimize your interest payment. If you are paying very high interest on one of the cards, pick up a card which offers 0% balance transfer APR and pay the balance transfer amount in that period. And well, maybe have a card which maximizes rewards/cashback on purchases. For people who travel a lot by car, pick up a good gas card. For those who accumulate frequent flyer miles, pick an airline card which accumulates points from purchases. Maybe go to the extent as to ensure that you have product protection on atleast one of the cards (means that you can get a replacement for the product if the same is stolen or damaged within 90 days of purchase!)
Final advice - read read read the fine print. Some examples of slippery tracks to avoid
- Don't always fall for a 0% intro APR card. Check what the APR will be after the offer expires. Some cards carry ridiculously high APR once the offer period expires
- Verify what the grace period is for the card. Usually cards offer a grace period of 21 days after which the purchase amount will be added into interest calculation. But there are cards which specify in fine print that this is true only if there is zero balance amount from the previous month. Watch out!
It's a cunning world out there - so be sharp and be smart...
So the advice for the day is - Be aware and play the game sharp. I have three credit cards and one fine day realized that I was paying exorbitantly out of my pocket for two of the cards. Finally decided to dig deep and see how they actually work.
Here's an interesting article I came across - it explains every thing a person should know and should keep in mind before apply for a credit card.
http://www.federalreserve.gov/Pubs/shop/
A few tips
Though I should put in my two cents on understanding credit cards. The biggest advice - PLEASE READ THE FINE PRINT - in fact, the fine print ain't so difficult to comprehend. In fact, as explained in the article above, every credit card company is required to explain all the essential facts (like APR, balance transfer, cash back, basic rewards, APR calculation cycle, etc) in a standard table in the 'terms & conditions' page. So the simple rule is - Learn what they imply and read the fine print.
Secondly don't blindly choose a credit card - play it smart. Every credit card has a lucrative offering based on the type of card. Some of the common types
- Zero/low intro APR
- Zero/low balance transfer
- Cashback rewards on purchases
- Gas cards
- Airline/hotel points cards
So play a clever game. Eg. choose a card with zero intro APR and use it extensively for 12 months and help to eliminate/minimize your interest payment. If you are paying very high interest on one of the cards, pick up a card which offers 0% balance transfer APR and pay the balance transfer amount in that period. And well, maybe have a card which maximizes rewards/cashback on purchases. For people who travel a lot by car, pick up a good gas card. For those who accumulate frequent flyer miles, pick an airline card which accumulates points from purchases. Maybe go to the extent as to ensure that you have product protection on atleast one of the cards (means that you can get a replacement for the product if the same is stolen or damaged within 90 days of purchase!)
Final advice - read read read the fine print. Some examples of slippery tracks to avoid
- Don't always fall for a 0% intro APR card. Check what the APR will be after the offer expires. Some cards carry ridiculously high APR once the offer period expires
- Verify what the grace period is for the card. Usually cards offer a grace period of 21 days after which the purchase amount will be added into interest calculation. But there are cards which specify in fine print that this is true only if there is zero balance amount from the previous month. Watch out!
It's a cunning world out there - so be sharp and be smart...
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