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It is a fact of modern life that credit cards are an increasingly essential financial tool. There are many situations in which if you do not have a credit card, you will either be unable to pay for goods and services, or to take up special promotions. There are also countless more situations when having a credit card will simply be extremely convenient. Credit cards are also safer than carrying large amounts of cash around with you, especially when you travel.
Criteria
Well, first of all you should be over 18 years of age. You will also need a job or some form of regular income. These are then main criteria and if you can demonstrate them well, you will probably not have much trouble getting approval. You may have had a card in the past that you failed to pay or some other blemish on your credit report. If this is the case, you will find it more difficult to get a card.
Credit Rating
Your credit history plays a very significant role when it comes to assessing who will be approved for credit and who will not. It is based on personal information, your salary, if there have been defaults or court judgments awarded against you, and a host of other factors. They are all put into an equation that computes a personal score for you. Lenders will then decide whether or not to lend to you based on this score.
You should also be aware that many other companies will use your credit report also. It is not only credit companies, but also insurance companies and even employers, when looking at job applicants. This may seem surprising but the thing to remember is that you do not want to damage your credit report by failing to meet repayments.
Refused Application?
If you are finding it difficult to get approval for a credit card, you may consider seeking a co-signor. This is someone, usually a parent or close relative, who will guarantee the debt for you. They must understand the nature of the agreement, and if the situation arises whereby you are not able to make your repayments, they will become fully liable for the amount you have borrowed. It may also be a good incentive for you to repay it.
The final thing to remember is that if you have been turned down for a credit card, it may be an indication that you are not ready for one.
Frankly, how many of us really bother to read the fine print before getting a credit card? Not many, really. As we get lured by attractive offers and benefits on these cards, we tend to neglect the important part of this process, i.e., terms and conditions. The gravity of which dawns on us when we get our credit card statement. If you do not want to be surprised by the figures mentioned in your card statement, watch out for the following things before you get a credit card.
Interest Rate
When it comes to the interest rate, credit card companies get creative. They usually mention the interest rates as 2.49% or 2.95% which might not seem to be very high at first. But these are monthly figures that on conversion give a very high annual cost. For instance, the interest rate of 2.49% per month works out to 34.33% on an annual basis, and 41.74% for 2.95%. Further, credit card companies can change their interest rates, on a short notice of 15 days.
Minimum Amount Due
If you are not able to pay the entire outstanding dues on your credit card, credit card companies will ask you not to worry about it and just pay the minimum amount due. But why? Because this situation leads to more interest generation for the companies as the customer is less likely to pay off the balance. Minimum amount due is usually a certain percentage of the total amount that you have to pay each month. This is around 5%-10% of the outstanding balance, and it can vary across cards. If you pay the minimum amount due then you automatically slip into the interest rate cycle, and the interest will start accumulating on the remaining outstanding amount that is yet to be paid. If you miss the payment altogether, not managing to pay even the minimum amount, then there will be a non-payment charge that will be levied along with the interest. This means there is a double hit on this account.
Annual Fees and Other Charges
There are annual fees to be paid on the credit card, which represents an expense for you. These are generally waived on entry-level cards but are levied on premium cards. In addition, there are charges such as joining fees. Benefits offered by premium cards are much higher than entry-level cards. Hence, you should decide on the fees factor based on your requirements.
Credit Limit
Credit limit is decided after taking into consideration your income, your current job and position, your credit behaviour among several other factors that are decided by the bank issuing a credit card. A credit limit is not fixed forever once it is decided, but it keeps changing over a period of time. Depending upon the developments, including your track record, the credit limit can be raised and this will give you a higher limit to spend. Also keep in mind that if you do not pay your credit card bill on time, there are chances of your credit limit being reduced.