Unsecured lines of credit like that of credit card can have wide repercussions, depending upon the user and his/her spending pattern. Though credit cards are an instant source of cash anywhere in the world, yet it can lead to potential financial crisis, if not managed well.
So, if you’ve been looking to use credit cards, then you ought to know how to choose the best one amongst the lot.
How to get the most suitable credit card
Here are some of the ways to locate the best credit cards as per your financial needs:
Rate of interest – On every credit card offer document, you’ll find the interest rates are mentioned as annual percentage rates or APRs. They may vary or remain constant depending upon the terms and conditions of the credit card issuer. However, APRs are mostly associated with a different financial indicator known as prime rate. Through a fixed-APR card, you’ll get to know exactly how much you are liable to pay each month, but this wont be possible if it is variable-rate card since your debt repayment amount will fluctuate on a monthly basis.
Spending behavior – You must have a clear objective regarding the way you are going to use your bank cards. If you are person who intends to stay current with his/her monthly payments, then the rate of interest on the credit cards won’t be of a much difference to you. However, choose a card that doesn’t carry any sort of annual fee and provides you with extended repayment period (grace period).
Credit limit – The amount of money that your creditor is willing to offer you as loan on your credit cards is known as credit limit. It is decided on the basis of your past credit history and that may range from few hundred dollars to about thousands of dollars. Your credit limit should be such that you don’t max it out very soon since that may ding your credit score.
Credit cards have been really helpful to those who use them responsibly and stick to their budget. Still, you being a credit consumer yourself, it may happen that you’ve racked up huge balances in the recent past. In such a scenario, you can get debt relief but through some prudent financial management steps.
How to manage spiraling credit card debt
Here are some of the ways to tame your credit card bills from going out of your control:
Stay away from too many cards – Having more credit cards than you need, will make managing your balances all the more difficult. As a result, you may unintentionally overlook some credit card bills and forget to repay them on time. So, as experts recommend you shouldn’t close any of those credit accounts, rather keep them lying with no balance at all. This way you’ll get to lower your monthly payments and at the same time protect your credit score from dropping.
Keep APRs in mind – The APRs on all your cards are also of great importance when seeking to get debt relief, besides the number of cards you have and their credit limits. Though APRs aren’t reported to the credit bureaus on a regular basis, yet you should know the amount applied on each and every card of yours. So, you can then transfer the balances of all high interest cards to a low one and pay them off with ease.
Steer clear of only one bank card – Using a single credit card may turn out to be a risky state of affair. This is because you may have to use your lone credit card for some medical emergencies and that can shoot up the balances on it all of a sudden and may even go beyond the set credit limit. So, in order to avert such a situation you can have another fresh credit card to be used for urgent needs only.
Doing so will help to avoid maxing out on your card’s credit limit, thereby helping you to avoid paying any over limit charges and will also protect your credit score from tanking.