Five things to know before applying for credit card.
Everybody wants to have a credit card in their pocket so they can use it when they want and pay it back upon their salary payment date which normally is in the last week of the month. Problem arises when we just go for any credit card in the market as there are many options these days. After having years of experience of using different credit cards from many different companies I came to conclude Five things which we must know when applying for credit card.
Interest Rate: It is by far the most important factor when you are selecting a credit card. Always look for the reduced rate of interest. Interest rate is normally given per annum but you can always take monthly interest rate by diving per annum to 12. It will give you an idea of how much interest you will be charged on money you owe to banks. Interest rates normally vary and depend a lot on your previous credit history and amount you owe to other banks and lenders. More money you owe to other banks and more missed payments you had to other lenders, higher interest rate you will be offered as new lenders see it as threat of Nonpayment.
Interest Free Period: Normally banks offer up to 60 days interest free period but again it varys bank to bank. You must go for a card which offers more days in interest free period. Every day is important as I gives you an extra time to pay off you debt.
Late payment/Missed payment Fee: Late payment fee is charged when you pay your debt late. Likewise if you ever miss a payment banks charge Missed payment fee which normally is around 10-20 Pounds. You must apply for a card which charge less fee on late payment and missed payment because we are all humans and time comes when you cannot pay on time, so you should keep attention to this aspect too.
Repayment Plans:
Repayment plans are used when you cannot pay your debt and you have to discuss with your lender so you both can reach an agreement to pay off the debt which works for both the borrower and the lender. Some banks offer very flexible repayment plans which are easy and convenient for customers, others in contrast have very strict rules and tensed repayment plans with hardly any flexibility. People normally think I don’t need a repayment plan as my financial position is going to be ok all the time anyway. Its not the case, our financial situation changes and can change in life so we must have contingency plans for ourselves.
Annual Charges: Most of the credit cards do not have any annual charges but some cards do have annual charges which provide extra facilities like bonus or repayment of some amount of any points which you can reimburse and use when needed. I would encourage you to go for a card without any annual fee. It ranges from 20 pounds to 100 pounds but does not come up with too many benefits. However these premium cards also comes with some good benefits too like less interest rate and extended period as interest free period.
Although above mentioned 5 points are very crucial in deciding which card is best for you, but there are other many factors which are customer specific, e.g. you already have a credit card and you are applying for new one to pay off the earlier one, in such circumstances Balance Transfer or money transfer cards are useful. You must consult a Financial Advisor who will provide you help in your circumstances. It’s always better to go for an expert before committing yourself for such loans or credit cards.
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