Before You Apply for a Credit Card
with
Natasha Levitan
While a credit card may seem like a good idea, you want to make sure it will help you build credit instead of destroy it. Find out what you should consider before you sign your name on the dotted line.
Transcript: Before You Apply for a Credit Card
Hi, I'm Natasha Levitan for About.com. When you decide to get a credit card, you might be overwhelmed with credit card offers. You may receive at least several in the mail every day and it is tempting to sign up for every card. Here are some things you need to consider before applying for a credit card.Before You Apply for a Credit Card
Ask yourself why you are considering getting a credit card. If you are trying to build credit, you need to make sure that you act responsibly with your card. Spend within your budget and pay off the balance in full each month. If you are getting a card because you don't have money in the bank account to purchase things, do not apply. If you don't pay your balance off every month, you will end up paying (more money) in interest over time.Check Out the Credit Card's Interest Rate
Next, look at the interest rate and always read the small print. Many cards will lure you with the introductory rate of zero percent interest. This is to encourage you to build a balance that you will not be able to pay off during the promotional time. Your interest rate may jump up to 15 or 20 percent after the introductory period is over. If you are offered an interest rate as high as fifteen percent, you should keep looking for another card.Inquire About Annual Fees
Look for a Card with No Annual Fee. There are so many credit cards available that you should not pay an annual fee in conjunction with your card. Many cards try to offer you cash back or other rewards as long as you pay an annual fee with the card. There are rewards cards that do not charge an annual fee, so you should keep looking.If you are going to pay the entire balance at the end of every month, you should look carefully at the rewards that you can earn by using your credit card.
Generally the best deals are on the cash back cards. These cards return a percentage of your spending to you. You may be able to cash these rewards in for a higher amount on a gift card.
Credit Card Penalties and Fees
It is important to understand the penalties and fees that are associated with your card. The bank can raise your interest rates for one late payment. Additionally you will be charged a late fee. If you exceed your balance then you will be charge an overbalance fee and your interest rates will be raised as well. These interest rates can go as high as thirty percent.It is too easy to find yourself completely overwhelmed with debt if you have more than one credit card.
Thanks for watching. To learn more visit us on the Web at money.about.com.