If you are in a dilemma about whether or not you should get a credit card, then this blog will clear all your doubts. A credit card can be a great financial tool if you know how to use it. But if you don’t know how to use it, it will be a financial trap for you.
How Does a Credit Card Work?
A bank or financial institution offers a credit card. This card is tied to some credit account with the bank. While using a credit card, you borrow money from a credit card issuer. Credit cards can be used to either avail services or buy products following your need and demand.
You own a remaining amount on some credit cards, known as the balance. Every credit card comes with a specific credit limit you should know about. A credit limit is considered to be the maximum amount that you can own your bank.
How to Build Credit?
To get a bank credit card, you need to meet certain eligibility. Once you get the credit card from the bank, you should use it in such a way that it will help you to build a good credit score. You need to know several aspects to build a good credit score.
Pay on time: Once you use a credit card, you must pay on time. Payment history is regarded as an essential factor while determining a credit score. So if you make payments every month on time, it will surely help you build a good credit score if you can then opt for the autopay feature.
Then you will not forget to pay off the credit card bills every month. This is a good way to ensure that you never miss a payment. Even if you take Apnapaisa Loans, you should pay off the loan quickly.
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Keep the Balances Low
It is a good habit to keep credit card balances low. Keeping your credit card balances very high is never a good idea. It is better to never use more than 30% of the total credit limit. So if you can do this, you can build a better credit score using a credit card.
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Request for Credit Limit Increase
Once you use a credit card for 1 year, you should ask the card issuer to increase your credit limit. A higher credit limit makes it easier to keep your balances low. There are several benefits of having a higher credit limit that you must know about.
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Keep the Account Open
The average account age is one important factor that determines your credit score. Keeping older accounts around is a good idea to increase your credit score to the fullest. You should not proceed to close your first credit card for all the right reasons. This is known to be a good exercise that helps in building a good credit score.
Things to Look for in the first credit card
If you are going to apply for your first credit card, there are a few things you should look for in it.
- No Annual Fee: You should eye a credit card with no annual fee or charge. Getting such a credit card is beneficial for you. You do not need to pay any annual fee to keep the card active.
- Welcome Rewards: A few credit cards come with welcome rewards. You should eye these credit cards for your convenience and benefits. You may need to do little research to find such cards.
Using a credit card is useful for you. Finding the right card and knowing the correct ways to use it is everything. You should explore everything about credit cards before using one.
