Having a credit card will be one of the most important financial responsibilities that you will have. While it is just one card, it is actually a very complex financial product that can potentially cost you a lot of money if you are not careful.
If you are new to credit cards, how it can affect your credit score and much more, see if you are familiar with these core concepts.
Interest Rates
With credit cards, interest rates are incredibly important. This is because interest rates can range from 0 percent to as high 30 percent through balance transfer offers. Creditors will often use certain criteria such as your assets, debt burden, income, credit inquiries, payment history and credit score to set your annual percentage rate.
What does this mean for you? Well, if you have a positive credit history and you have a pretty decent credit score, you will be eligible for lower rates. That is why you need to start implementing positive financial habits and start making a positive history.
It’s Not Free Money
While this should seem like an obvious fact, people easily fall into the trap of thinking they can spend whatever they want and however they please. When you get a credit card, it does not mean that you will have an endless supply to spend on. You start out with a credit limit based on the information that you provided the creditor. Once they fully evaluate, they will determine your credit limit.
Your credit limit is the amount of money that you are able to spend in one cycle. Generally, people recommend to not go over a third of what your limit is, because it can become more difficult to pay with any added interest when payment periods come at the end of the month. When you get the card, be wise and do not fall into the dangerous trap of spending it in any way. If you need further assistance or any other financial resources to assist you, Grand Canyon Advisors is a valuable option for you.
You Can Choose to Pay In Full or Not
You should also be aware that when it comes to your credit balance, you do not have to pay the full balance per month. What is required out of you is at least to make the minimum payment. However, you should not get into the habit of just making the minimum payment because your creditor may start to deem you as a high risk borrower and increase your interest rate exponentially.
Credit cards offer revolving balance options, so paying the entire loan per month is not necessary as long you can make at least the minimum. Whatever is remaining along with any added interest will be added towards next month’s payment cycle.
How Many Cards Should You Have?
One question that many people wonder is if they need to have a set number of credit cards. There really isn’t a perfect number that you should have at your disposal. Most consumers hold no more than a couple of cards to suit their needs.
If there is a retail card you want, you should make sure it’s a store you shop at often. There are experts at Grand Canyon Advisors that can assist you with some of these financial questions
