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How Does a Credit Card Work?

How Does a Credit Card Work? Photo

©Depositphotos/Valentyn_Volkov

Have you ever witnessed someone whose trying to pay his groceries but can’t immediately choose between his 6 to 7 credit cards? Well, it is only a tiny proof that U.S. citizens just can’t live without having a card or two. Surveys revealed that the majority of Americans own at least 1 card, and the rest of them own 2 or 3 of it. A credit card is not only an asset, it’s more of a benefit if you only know how to use it well. But the big question is, how does it work anyway? Yes you can pay your groceries with it but other than that, does it have any other uses?

How Does A Credit Card Work?

Using a credit card is like having a loan from a bank. You’re not getting free money from it. Rather you are borrowing. If you will pay something using your credit card, you also agree that you pay it back. The payment period can vary. Some providers such as banks, will allow long term payments which can run for a couple of months, and others will require a monthly payment.

There’s also a charged interest, and the interest rate depends on the credit card provider. This interest usually appears in the picture if you won’t pay back immediately.

How Do I Choose A Credit Card?

There are tons of credit cards out there, not to mention the high number of banks offering it. Choosing one can be agonizing especially if you’re a first timer. Nevertheless, there are three main keys you should keep in mind. Choose a provider and a kind of credit card that offers the best rate and that meets your needs. You should also go for the one that gives something back and not simply draining all your cash. One that offers cash-back, rewards and merchandise should be favorable.

How Many Cards Should I Have?

Now this is one of the most brain-twisting questions. Some people prefer lots of it while others want only one. Which is right anyway? It all depends on you and you alone. If you can handle the responsibilities of 3-5 cards then it would be fine. However, if you want to have a simpler life, then settling with 1-2 is okay. Keep in mind that owning a credit card is one big responsibility. There are payments you should make and interests you should pay just in case. You have to consider all important factors first before obtaining your second card.

How To Apply For A Credit Card?

Although most banks have different application and qualification basis, the bottom line is quite similar. You will have to fill out an application form which also means that you agree with all the terms and conditions entailed. Your bill-paying history, ability to make payments and debt history will all be considered and scrutinized by the creditors. If you don’t have problems with the said key factors, then you will be on your way towards getting your first credit card.