and Using Your First Credit Card
A "first" credit card can be exciting, tempting and intimidating. Credit cards are a great convenience, but they are also borrowing money that must be repaid. Here are some ideas to keep in mind as you get your credit card and use it.
Choosing a credit
card - fees, interest rates and benefits
Annual fees can vary from zero to $75 per year. Ideally, you would want to choose a card with no annual fee. There are also fees that companies charge for late payments. Be sure to check the terms of the credit card agreement, especially if you are occasionally late with a monthly payment.
Interest rates can also vary greatly and can exceed 20%. You should also be very careful of low "teaser" rates, or special rates for a limited time if you transfer balances from another card. Another way issuing companies increase the amount you pay is by how they calculate the interest. Be sure to read the details of the agreement.
Many cards offer benefits for using the card. Using a credit card can bring the rewards of airline mileage, discounts on travel, electronic gifts, discounts on cars and other benefits. A rule of thumb is that the benefits are usually worth about 1% of the charges. If a card with these types of benefits is important, make sure the benefits are those you will use and that the other aspects of the card do not offset the benefits.
Card A - No annual
fee, 18% interest, no benefits for using it.
As you can see, the differences are substantial. The differences become even more pronounced if the unpaid balance or amount of usage is higher. The example above is quite simple and the cards are not meant to represent those offered by any institution. Be sure to read and understand the terms of any credit card before accepting it.
Be sure your credit card provides the right combination of fees, rates and benefits. If you do not carry over balances and pay finance charges, you might be willing to accept a card that has high rates and maybe even an annual fee if the benefits were your main focus. However, if you normally pay finance charges or interest, pay extra attention to the interest rate.
Guidelines for using your credit card