So, you are finally ready to get a new credit card. You are ready to submit all necessary documents and go over them with your credit card provider. You have already received a notification suggesting that this will be your final step and you are good to go. Whether this is your first credit card or not, it really pays to be careful and knowledgeable about what to expect. At the end of the day, you want to use your card responsibly in order to maintain a good credit standing.
But first, let’s find out why there is a need to own a credit card. After all, you want to know what advantages you will be getting before going in deeper. In that case, you have come to the right place. Here is everything you need to know about getting a new credit card and things to look out for!
Why You Should Own a Credit Card
A credit card is just one of the many things out there that can help you make purchases. But beyond that, it can be so much more, especially if you know how to use it properly. As long as you use your card responsibly, you should be able to build a good and rewarding credit history. And, as a result, you will be able to enjoy its many benefits. These include, but not limited to, getting access to loans at favorable interest rates and lower down payments, a much cheaper insurance plan, and more.
So, why is there a need for you to own a credit card, anyway? Why even bother?
By essence, your new credit card is your go-to financial product, one that is convenient and easy to use. You can use it for everyday purchases, such as groceries, airline tickets, gas, and other goods and services out there. What is more, it can be a great resource for purchase bigger items, such as travel packages, appliances, and jewelry, among many others. Keep in mind that the funds needed for these items might not be easily available at your disposal.
But beyond the convenience of using a credit card, it can also act as your loan that needs to be paid back accordingly. In case you didn’t know, this loan comes with an annual percentage rate (also known as APR) which is basically the rate that needs to be paid based on your charges. Of course, the figures here can vary greatly depending on your credit card agreement.
Now that you understand what a credit card is and how helpful it can be. It is time to take a look at things you need to look out for when getting a new one.
Understanding Grace Period
This is one of the many benefits of using a credit card. Basically, you are able to obtain an interest-free loan and it comes with a grace period of between 21 and 25 days. To understand how it exactly works, let’s come up with an example. Let’s say your credit card period is from January 5 to February 4, with March 1 being your due date. Any purchases you make within this period are expected to come interest-free, but only until your payment due date comes. However, if you are unable to pay your balance – be it in full or before the due date – expect to owe interests when it comes to your daily balance.
How Your Credit Card Interest is Calculated
A lot of people often think that a credit card interest will only be assessed on the card balance remaining, particularly after the payment due date. Well, this is not really the case all the time. If you are unable to pay your balance in full, expect yourself to acquire interest on your average daily balance and this happens during the month.
For example, your card balance right now is $1,000. On the 11th day of accruing interest, you should be paying $200. And when the 21st day of accruing interest comes, you are expected to pay another $350. As a result, you will be getting an average daily balance of at least $750.
If your card’s (APR) is about 20%, then the periodic interest rate is going to be at least 0.0548%. As far as the periodic interest rate is concerned, this is calculated by using 365 to divide the APR. From there, the average daily balance is multiplied by the periodic interest rate and the number of days in the month. Once done, you will be introduced to your interest accrued for the month. In the case of the example provided, the figure is going to be $12.33.
As you can see, getting a new credit card is beneficial. Not only is it convenient, but it also flexible especially when in times of need. However, it comes with dire consequences if you are not careful. So, make sure to remember all of the things mentioned above and you should be good to go!