Step-by-step instructions for choosing a credit card

From the number of proposals in the market is dizzying. Even one bank has several types of credit cards and conditions on them, and there are dozens of such banks. In this article, let’s understand the main points you need to pay attention to.

A credit card is an executed loan agreement with a bank. It has essential conditions – the loan amount (or credit limit), the period of use without interest, the interest rate, the term of the loan. On the one hand, these parameters are easy enough to compare. But it’s not that simple, because there are many more options, such as service charges, the ability to accumulate bonuses, cash withdrawal fees, a list of banks where you can get cash without fees, etc. Even the annual card maintenance can be organized differently: the fee can be charged once a year or monthly, the first year can be free in service, and the subsequent years will be charged a fee.

Below we’ll take a closer look at exactly what to look for when choosing a credit card.

Credit limit

One of the main characteristics of the card is how much, in fact, money the bank is willing to lend you for use.
The limit is determined individually, based on each individual borrower’s ability to pay. The higher the income, the higher the proposed loan limit.
If the limit is too high, there is a risk of losing control over your expenses and getting into debt. You should keep a close eye on your expenses and pay your debts on time to make sure that doesn’t happen.

Interest Rate

This is essentially the cost of credit, which is the money you have to pay to use the bank’s money. Typically, the interest rate on a card is higher than on a personal or consumer loan. This is a kind of convenience fee: after all, the money on a credit card is always at hand, and you can use it at any time.
It would seem that the lower the interest rate, the better for the client: after all, he has to pay less. But it is not that simple.
Low interest rates often mean that the cost of issuing or servicing the card is high, so the interest rate is not the only thing you should look at when choosing a credit card. Although, of course, it is one of the main characteristics of this product.

Grace Period

This is the most interesting feature of credit cards, which allows you to use them as efficiently as possible.
This is a period of time during which you can use the borrowed funds for free. The bank starts charging interest only when the grace period is over.
Experts urge not to abuse the grace period. In general, the golden rule of using a credit card is as follows: don’t spend money you don’t have.
Note also that even during the grace period the bank will expect you to make minimum payments. If a person has proved to be a reliable debtor, these payments can be waived.

Fees and other payments

Let’s find out what else the bank may charge you for. The commissions listed below are the most common:

  • Card service fees
  • Cash withdrawal fees
  • For transfers

The credit card is designed to be used in stores. Other operations make the banks suspicious. That is why some impose additional interest on credit card transfers.

Bonuses and loyalty programs

Banks now can not offer any radically new or super-beneficial terms on credit cards. And the fight for the client only intensifies. However, the average person benefits from it, because it forces banks to make interesting offers.
One of them is cashback. You pay for a purchase with your credit card and get a part of it back, at least a small part. As a rule, banks offer cards with cashback on certain categories of goods. For example, you get money back for airline tickets.
Another cashback option is for purchases at partner stores. The bank has contracts with retail chains, in which they “exchange” customers.

Tips from experts

Understand which credit card is more profitable, you can only assess the totality of credit terms. For example, the grace period for interest-free use of money in one bank may be much longer than in another, which, at first glance, is beneficial to the client. But at the same time the interest rate will be higher or there will be some other associated unobvious payments. Therefore, the most important thing when deciding to apply for a credit card is to have a complete list of all credit terms.

How a credit card works

When used properly, credit cards are a convenient financial tool. They allow you to pay for purchases in stores and online around the world, have a grace period of up to 3-4 months, during which you pay no interest to the bank. In contrast to the consumer credit, the card does not have to constantly “reopen”. Simply pay off the debt of the grace period and use the card to make new purchases; the available credit amount is replenished automatically.

What are credit cards and how do they work?

A credit card is a piece of plastic that allows you to use the funds in your credit account. The period in which you can spend the money is called “reportable” and is activated on the day the card is issued, the first day of the first payment or the first day of the calendar month – different banks have different conditions.
When issued, the card has a non-zero balance. The money available for spending is the credit given to you by the bank. You can spend it on goods and services, including communications charges, restaurant reservations, and school fees.

The credit card works like this:

  • You pay for a purchase within your available limit
  • No interest is charged until the end of the grace period.
  • If you repay the debt in full by the end of the grace period, you will have the full limit available in the new period
  • If you spend and repay partially, your credit limit is reduced by the amount owed
  • If you use up your limit in full, you will have no funds available in the new reporting period

Most credit cards with a grace period have a higher interest rate when withdrawing cash or transferring funds to individual credit cards, and for some products such transactions are generally not possible.

In addition, when using a credit card, the holder enjoys the same privileges as when using a debit card:

  1. Discounts and Privileges for Mastercard and Visa. These can be discounts on purchases in major chains and payment sites, increased bonuses of affiliate programs, discounts on travel, free access to business lounges in airports.
  2. Special bank services. Dedicated telephone support line, preferential exchange rate, higher rates on deposits, opportunity to open several cards, free life insurance for the whole family
  3. Participation in cashback programs.

Credit Limit

A credit limit is the amount you can spend. It depends on the customer’s ability to pay and proof of income.
Credit limit can be increased by active use and timely repayment of debts on the card. All transactions such as purchases in stores, payments on websites, auto-payments for cell phones, tax payments, as well as cash withdrawals and transfers to other cards reduce the balance available for spending. The interest charged for using the credit after the grace period does not reduce the available balance, but increases the amount owed.

What is a grace period?

A grace period is a period during which you do not pay any interest.Its duration is established by the bank.
Grace period duration varies with the different service packages, it can be as short as 30 days or more than 100. The client can choose a credit card with cash withdrawal options, a maximum limit, increased bonuses or cashback on all purchases, and a convenient grace period.

Unlike a debit card, a credit card requires not only a passport, but also proof of permanent income.

8 facts about credit cards

Sometimes it happens that you urgently need to borrow money before your paycheck or you don’t have enough money for a big purchase. In such cases, a credit card can help! About this financial tool is perhaps the greatest number of horror stories and rumors. Together we’ll try to figure out how the credit card works and when it can be of great help.

Fact #1.

With a credit card, you’re spending the bank’s money, not your own.
A credit card gives you access to the bank’s money, not your own. With a credit card, you can borrow money from the bank for a while and then pay it back. Not everyone understands the difference between credit cards and regular debit cards. Let’s explain in simple words: with a debit card we use our own money, but with a credit card we use the bank’s money.

Fact #2.

A credit card is your backup wallet.
There are times when something you need that you need right now breaks down. For example, a car or a laptop computer. And you don’t have money for its repair, but you will have it in a month, let’s say. In fact, the credit card – this is your spare wallet, from which you can take as much as you need, if you need it urgently. It is also convenient to use your credit card to make purchases in stores and on the Internet. Cash can also be withdrawn from your credit card, but with a fee.

Fact #3.

There are different credit cards, so you should choose the one that suits you. Nowadays the financial market offers a great variety of credit cards. What should you pay attention to?

  • The most common payment systems you should pay attention to are VISA and MasterCard.
  • The status of the card – there are classic, gold and platinum cards with different privileges and chips.
  • Limits – spending limits can be very small or in the millions.
  • On different programs – there are cards that add airline miles for spending or make deductions to charities when you spend on them.

Fact #4.

You don’t have to pay any interest on your credit card.
The credit card, like a classic loan, gives you interest, but you can choose not to pay it. Often there is no commission for the annual maintenance of the credit card. If you manage to keep your payments within the interest-free period, the credit card will cost you nothing.

Fact #5.

Grace period is very convenient and easy.
Any credit card has a grace period, or a period in which you can pay no interest to the bank. It consists of two parts – the accounting and payment periods. During the first one you can pay with your card in stores. During the second part you need to return the entire amount spent, so that the bank did not accrue interest. Remember that the grace period is valid only for cashless purchases! It does not apply to transfers and cash withdrawals.
The interest-free period begins not with your next purchase, but with the date following your report. Once a month you will receive reports by email with all the information.

Fact #6:

The credit limit can be changed.
The amount you get on your credit card is limited, each bank determines the limit based on a customer’s ability to pay individually. For bank customers who have an account with regular payments or a deposit, the credit card limit is likely to be higher than for new customers of the bank. A credit limit can be increased if you regularly spend money from your credit card and, most importantly, pay it back on time.

Fact #7.

You can replenish your credit card by cash and noncash methods.
You can control the funds on your card in the same way as you do on your debit card. As a rule, banks have a mobile app.

Fact #8.

With your credit card, you can pay in stores and on the Internet.
A credit card can be used to pay for purchases around the world and online. Anywhere there’s a payment terminal – just show your card to a cashier. If you pay by contactless method with your smartphone, you won’t need to enter your PIN code.
It’s also convenient to pay with a credit card in online stores. Remember that online purchases are protected if they are made at verified sites. You will receive an SMS with a code to confirm your purchase. Don’t give it to anyone, even if it came to you when you weren’t shopping.

To summarize, a credit card is a convenient payment tool that allows you to save money. But remember that it requires self-discipline, organization, counting skills, and regular income to repay the loan on time.

5 advantages of a home equity loan

Do you urgently need money? No problem, you can apply for a consumer loan at any bank. All you have to do is bring your pay slip to prove your ability to pay.

But you should not assume that you can borrow any amount of money. The size of your loan is based primarily on your income. What should you do if you urgently require a large sum of money? Home equity loans can be the solution. Continue reading “5 advantages of a home equity loan”