Considering Credit Cards? Things To Know Before You Choose
One of the best ways to establish, build, and grow your credit history is with credit cards. Unfortunately, many people lack the experience and understanding needed to choose the right credit cards for their financial situation. It's important to give your credit card selection careful thought in order to carefully manage your credit. Here's a look at a few of the things that you should know about choosing and using credit cards carefully.
Consider Secured Cards First
Especially for those who lack experience with credit cards, it's often best to get a secured credit card first. These credit cards take a deposit, then extend you a credit line equal to that deposit amount. Your cash deposit is the company's surety that they will get paid if you default on the card. These are often the easiest cards for new credit card users to get because the accounts are secured. That allows you to start learning about credit management with less risk to the lender.
Assess The Interest Rates For Each Account
As you start to build your credit history and improve your credit score, you might find that you start receiving offers in the mail for credit cards. However, you shouldn't just blindly accept any credit card offer that comes in the mail. One of the most important deciding factors for your credit cards should be the interest rate on the account.
Remember that the higher the interest rate, the more money you'll spend paying down a balance over time. If you do opt for a credit card with a higher interest rate, try not to carry a balance into your next billing cycle. Otherwise, you'll pay more than you need to in the higher interest fees.
Manage Your Total Credit Usage
Once you have a credit card or two, the next important step is learning how to use them properly. Try to use less than 30% of your available balance each month. Keeping your credit usage below 30% of your available credit is ideal for building your credit history and showing creditworthiness for lenders. Even if you do need to use more than that, pay the balance down before your billing cycle so that the card doesn't carry over more than 30% of the balance usage.
These are some of the most important things to consider when you're looking for credit cards. Don't fall into the credit trap of overextending yourself and committing to cards that you can't afford. Proper credit management is an important place to start.