When used responsibly and wisely, credit cards can be a great financial asset, providing you not just convenient access to credit whenever you need it but also terrific cashback and reward programs that will earn back some of the money you spend. Conversely, if you miss repayment dates, they cost a pretty penny. If you’re considering getting a credit card, it’s essential to understand the terms and conditions of any credit card before applying for one. Otherwise, you could end up with a card unsuitable for your finances and needs or one with steep fees. Here, we’ll go over the five things you must be aware of when applying for a new credit card, including a credit card limit.
1. Know Your Credit Score
Apply for a new credit card after checking your credit report. This is one of the most critical factors a card provider will consider when reviewing your credit card application. It’s a measure of your creditworthiness based on your credit history, including payment history, debt-to-income ratio, and aher factors. Your credit score (ideally above 750) the more likely you will get approval for a credit card with ample credit limit and favourable terms.
You can check your credit score for free from credit reporting agencies like CIBIL (Credit Information Bureau India Limited). By knowing your score, you can apply for a credit card that is becoming of your creditworthiness and avoid applying for subpar cards or those that are out of your reach.
2. Understand the Credit Card Limit
A credit card limit is the maximum amount of credit (money) that a lender will let you take on your card, usually a monthly limit. You must factor this in with due consideration before applying for a new credit card. This is because it can significantly impact your credit score and financial health in the future.
Again, it comes back to your credit score. If you have a score and a stable income, you’re more likely to be approved for a credit card with a high credit limit. However, if your credit score is underwhelming or you have a high debt-to-income ratio, you may be offered a lower credit limit.
The limit offered to you is an intimation of how much you should spend in line with your finances. This will help you manage your spending accordingly. If you want a credit card limit increase, you may have to look around to find it. Whatever you decide, don’t overshoot your credit limit, as it can invite over-the-limit fees and other penalties. Also, exceeding your credit card limit can harm your credit score, as it indicates overextending yourself financially.
3. Compare Credit Card Offers
Before applying for any card, not just a new credit card, it’s advisable to compare offers from the many different providers. Credit card offers can vary widely, with sizeable differences in interest rates, fees, and rewards programs. By comparing credit card offers, you can find a card that fits your needs and financial goals well.
When comparing these offers, pay close attention to the interest rate, also known as the annual percentage rate (APR). The APR is the interest rate you’ll need to pay on your credit card balance if you carry a balance from one month to the next. Credit cards with lower APRs can help you save a lot of money on interest charges, especially if you plan to carry a balance.
You should also pay attention to all the fees associated with the credit card, including annual fees, balance transfer fees, and foreign transaction fees. Some credit cards offer rewards programs, such as cashback or travel rewards, which can be delightfully beneficial if you use your card frequently.
4. Read the Fine Print
Always read what comes under the dotted line: before signing on it. Before applying for a new credit card, it’s essential to read the fine print to understand the terms and conditions that come with the card. The fine print can include information on fees, interest rates, rewards programs, and other important details. By reading and understanding what it says, you will avoid any untoward surprises or hidden fees that could affect your credit card experience.
Some important details to look out for include the grace period, which is the amount of time you must pay back your credit card bill without incurring interest charges. You should also look for information on minimum payments, late payment fees, and any restrictions or limitations that apply to rewards programs and cashback.
It’s essential to read all the literature carefully, as some credit cards could have fees or charges that are not explicitly mentioned or as apparent as you’d like. For example, some credit cards may charge fees for cash advances or balance transfers, which can add up at quite a rate if you’re not careful.
5. Use Credit Cards Responsibly
This is the most important thing to remember before you apply and after you get your credit card. It is imperative to use all financial instruments responsibly and credit cards even more so. This is irrespective of the credit card limit. Credit cards can be a great financial tool, but they can also be a source of financial liability.
To use your cards responsibly, you must pay off credit card bills on time and in full each month. This can help you avoid late payment fees and interest charges, and even steady and help improve your credit score over time. Please avoid using your credit card to make excessive purchases you can’t afford to pay off. This can lead you to a cycle of debt that can be difficult to break, something you have to avoid!
When it comes to your next new credit card, apply carefully; it is a significant financial decision that can affect your finances and your life at large. Know your credit score, understand the card limit, compare credit card offers, read the fine print, and use your credit cards responsibly. Your next card could be a game changer for the better when you make an informed decision that aligns with your financial goals and needs.
Also Read: Best Reward Credit Cards Of 2021