Simply saying, credit card is a financial tool that lets you delay the payment for the thing you buy. Basically, the company issuing you a credit card just lends you some money that you must pay back in a fixed term, usually with an interest. The longer it takes you to repay, the bigger the amount of interest. The same rule is common for most of loans.
However, there are credit cards which are provided with no interest for several weeks or even months and picking such a card will definitely help with budgeting. Still, you should always keep control over your spending, so here are some points for you to watch out for while using plastic:
- Don’t spend more than you can pay back within the zero interest period.
- Check your credit history before applying for a credit card and do your best to improve it, if it is needed.
- Don’t file several applications at a time, because you can miss a chance to be accepted. Choose one card that reflects your needs and apply for it.
- Check the APR (annual interest rate). It shows the extra amount that is charged in case you don’t pay the balance in full each month.
- Be sure that you have a clear idea on the penalties which may be charged.
- Check the monthly statements on your plastic to spot any potential fraud as well as understand if you are on budget.
Standard vs. Student Credit Card
There are many different types of credit cards offered on the market today. Besides others, there are cards designed for students. Typically, they don’t offer great rewards and come with smaller credit limits for young people to avoid accumulating debt. But, keep in mind that such cards usually come up with higher annual interest rates meaning that they can be more expensive if you don’t pay your balance in full.
With standard credit cards which are provided with zero interest you can do your regular shopping enjoying an interest-free spending window and let your funds build up in a savings account. But, remember that you need to be a disciplined customer to really benefit.
If you are interested in rewards, cashback credit cards are just what you need. Using this type of plastic you can earn air miles, store vouchers or just money back. But the aim of the game is to clear your balance in full as any penalties can make the rewards useless.
Credit card, as well as any financial tool, can be really beneficial to you, if used properly. Stay responsible when making decisions and don’t forget that the money you spend with your credit card is basically a short-term loan that must be paid back on time. Keep in mind that you just start your independent financial life, so do your best to avoid any serious mistakes which may later have a negative impact on your credit history.