Cash rewards, foreign transaction fees, your credit line – having or applying for a credit card can seem pretty confusing. But the truth is that people who only use cash and savings accounts are, like those who don't go crazy for Taco Tuesday, firmly in the minority.
Our credit card cheat sheet will show you how to use credit cards to travel for free, get the most cashback possible and everything you need to know about credit cards.
This is the essential guide to choosing and using credit cards.
We'll cover all the basics, like the different types of cards and how your credit score works. But that's just the beginning. We'll also talk about how to protect yourself from identity theft – essential if you don't want to fund someone else's Louis Vuitton habit – and how to pick a card that fits your needs.
The Credit Card Cheat Sheet: Everything You Need to Know About Credit Cards Table of Contents
The Different Credit Card Types
There are lots of different credit cards out there, and it can be tough to know which one is the right fit for your hot little hand. But don't worry, we're here to help. In this section, we'll go over the most common types of cards and what they offer.
Secured Credit Cards
Roll up, folks! Let's shine a spotlight on secured credit cards. This little gem is perfect for those of you grappling with less-than-stellar credit or perhaps no credit history at all.
Here's the skinny: To get this card, you've got to pony up a security deposit. This deposit then doubles as your credit limit. It's a bit like renting a swanky apartment, where the deposit gives the landlord a safety net in case you decide to turn the place into a rock star's after-party.
Now, let's say you take a misstep and default on your payments. The card issuer has the right to seize your deposit. But don't let that scare you off! Most secured cards come packing the same perks as their unsecured counterparts.
So, if your credit has seen better days or is as blank as a fresh canvas, a secured credit card could be your ticket to rebuilding or creating a credit history. It's a step on the journey towards financial freedom, and the view can be pretty fantastic.
Rewards Credit Cards
It's all about the perks, baby! Cash rewards credit cards are one of the most popular types of cards out there. And it's not hard to see why. With a rewards card, you can earn points, cashback, a statement credit, or miles just for using your card. Then, you can redeem those rewards for things like travel, merchandise, or gift cards.
Balance Transfer Credit Cards
If you're carrying a balance on your credit card, you might be interested in a balance transfer card. These cards offer 0% interest on your balance for a set period, which can help you save money on interest charges. Just keep in mind that most balance transfer cards come with a fee for the balance transfer.
Student Credit Cards
College can be expensive, but a student credit card can help you manage your costs. These cards usually come with special features like 0% interest on purchases or cashback on textbooks. And some even have no annual fee.
Low-Interest Credit Cards
If you carry a balance on your credit card, a low-interest card can save you money on interest charges. These cards usually have a higher annual fee, but the savings on interest can be well worth it.
How Credit Limits and Credit Scores Work on Credit Cards
Your credit limit is the maximum amount of money you can borrow from your credit card issuer. Your credit score, on the other hand, is a number that represents your creditworthiness. Lenders use your credit score to determine whether or not you're eligible for a loan (or credit card) and what interest rate you'll be offered.
Most credit cards have a minimum credit limit of $500, but there is no maximum credit limit. Your credit score, on the other hand, can range from 300 to 850. The higher your score, the better.
Credit scores are calculated using several factors, including your payment history, credit utilization, and length of credit history.
Credit Cards and Identity Theft
Credit card fraud is more common than accidentally eating a family-size bag of chips by yourself. And it can happen to anyone. If you're a victim of credit card fraud, someone has stolen your credit card information and used it to make unauthorized charges.
There are a few things you can do to protect yourself from credit card fraud. First, always keep your credit card in a safe place – no, your glovebox doesn't count. Second, never give your credit card information to someone you don't know. And third, monitor your credit card statements closely for any suspicious activity.
If you think you've been a victim of credit card fraud, contact your credit card issuer immediately. They'll be able to help you cancel your card and dispute the charges.
Choosing a Credit Card That Fits Your Needs
Now that you know more about the different types of credit cards, it's time to choose one that fits your needs. Things to check when you're applying for a credit card include:
If you're looking for a rewards credit card, make sure the card you're considering offers the type of rewards you want. For example, if you travel often, an airline credit card might be a good choice.
Most credit cards have a minimum credit limit of $500. If you have a limited credit history, you might start with a lower limit and increase it over time as you build up your credit.
Some credit cards come with an annual fee. If you're looking for a no-fee card, make sure to check the terms and conditions before you apply as these cards might charge higher interest.
Balance Transfer Fees
If you're looking to transfer a balance from another card, make sure you know how much the balance transfer fee will be.
Don't Get Carried Away With Your Credit Cards
No matter what type of credit card you choose, having one is not an excuse to go on a spending spree that you can't afford. Credit card debt is real debt, and it can take years to pay off. In the meantime, it can wreak havoc on your credit score. So use your credit card wisely and always make sure you can afford your monthly payments.
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