Credit cards offer the easiest way of getting credit as well as earning points and miles. One has the chance of getting sign up bonuses and earning points every time they make purchases with the card. While doing this, it is very easy to be carried away thanks to all available options. Today, you will find many new incentives being offered by card companies all in the name of luring in new customers. Despite all the sign up bonuses and other rewards, there are pitfalls which could damage not only your credit limit, but your credit utilization too. So, how do you go about choosing the right credit-card? Here are 6 Credit Card Rules you need to know.
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Your income
Before you even think about applying for a card, you need to know your income sources. At the end of the day, the company will require you to repay the amount advanced. If not, you will be charged interest and it could lower your score making you illegible for higher limits.
Useful money-management tip – have an income that is reliable.
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Your spending habits
Credit companies want you to use the cards frequently. Before selecting one, you need to consider your spending habits. What will you be using it for- shopping, settling bills or filling your gas? If you want a go-to-card, consider selecting one with a generous credit-limit and solid rewards program. If you will be unable to settle your monthly payments, choose one with low interest rates and introductory rate to avoid bad credit.
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Credit-limit
This refers to a sum the financial institution is willing to let you borrow. It depends on your good financial borrowing history. It can range from a few hundred dollars to thousands of dollars. The one thing you don’t want is maxing the card very quickly. It will ultimately hurt your score, will lower your limit and could lead to further penalties.
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Fees charge
There are common charges which include fees for transactions for example balance transfers and cash advances. Penalties and fees charged are important considerations as they can save you. For example, what are the penalties fees charged when you pay your bill late or go over your limit? To be on the safe side, select cards with reasonable fees.
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Consider your balance computation method
Credit companies calculate balances by adding up daily balances and dividing it by number of days in the billing cycle. Choose a company that calculates the balance by using two billing cycles.
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Reward programs
Reward programs are nice benefits and it’s wise to look for one that is flexible. For example cash, travel or rewards you can actually use. They should also be easy to earn and redeem. It is important to be mindful of the restrictions that come with the rewards program. Do the rewards expire? Are there limits to how much you can earn?
