When you sign up for a credit card, you are essentially signing on a contract which contains terms and conditions you must adhere to in order to abide by the contract. The consequences for not meeting those obligations can be financially severe. It has never been more important to fully understand how credit works than now because of the high fees and penalties for not paying your bills on time.
Credit is not something to take lightly. If you don’t understand how it works or how you are supposed to manage it, you likely will never be credit worthy. It can be all too easy to lose a good credit standing by making simple mistakes.
Here are just a few terms and credit related terms that you should know about before even applying for a credit card.
Why Should You Know About Fees
For every different credit card there are different fees. If you don’t read over the information about how much fees are, how they are incurred, or how you can avoid them, you might be shocked when you are hit with fees your weren’t expecting and a balance you can’t pay. You want to verify and understand maintenance fees, annual fees, late fees, over the limit fees, balance transfer fees, and other associated terms your credit card issuer uses. For many, the interest rate is the only fee that is a major concern but it’s the other fees that can get you into a problem situation.
Why You Should Know About Transactions
If you are putting your name out there as well as your financial information when making a credit card purchase, it is in your best interest to understand how the transaction process works. When you use the card for purchases the rules will likely be different than if you used the card at the ATM. If you transfer balances from one card to the next, do you know how much that will cost you? Not all credit cards work the same way. Make sure you know how your billing cycle works and what your grace period timeline is.
Why You Need to Understand Rewards
If you take the time to sign up for a rewards credit card to benefit you, it only makes sense that you understand how the rewards program works. You’ll want to find out how you earn bonuses, what the bonuses entail, if there is a limit on the bonuses, or if the bonuses expire. Essentially there is no point in earning rewards if you have no clue how to use them.
There are many more items that should be reviewed per each credit card agreement and it is your responsibility to do just that in the interest of protecting your credit. Don’t rely on the credit card companies to highlight the fine print. Get yourself a good magnifying glass and really know what you are getting before applying for a credit card.