Finance and lending have taken a completely new shape in the 21st century. Why is that so? One may ask. Well, that’s because of technology. Now people do not carry huge sums of money with them rather they carry what is termed as ‘plastic money’. People used to work their butts off so that they could purchase things on their payday. Now you can borrow money and purchase anything you wish for and pay back the amount in future. The most common instrument used for purchasing goods and services on credit are the credit cards. Almost every salaried individual in the UK has a credit card and the credit card industry has grown at an exploding rate.
Are you young and have landed a job just after graduating? In such a case, following are some things that you must consider before you apply for your first credit card.
1. What’s the Cost of Borrowing
The cost of borrowing is the interest rate or the Annual Percentage Rate (APR) rate that the credit card issuing financial institution will charge you for using credit facility. As a rule of thumb, you must always go for that bank which charges the lowest interest rate on the credit card. This won’t put an undue pressure on you when the credit card bill arrives at your home.
2. Inquire About Your Credit Limit Before You Apply For a Credit Card
This is the amount that you can spend using a credit card. This credit limit depends upon many factors such as, your current salary, your credit score, and your credit history just to mention a few. The credit card with a high credit limit is obviously more preferred by the individuals. This will allow you to spend more than your ability to repay. Thus, you must never avail a credit card that will give you a high credit limit and will trap you in a vicious debt trap.
3. What are the Incentives
Some credit card issuing financial institution incentivizes their cardholders by offering them discounts on certain stores and restaurants. If your main aim of applying for a credit card is shopping and hangouts then you should apply for a credit card with a bank that offers such discount options as this will save you some quids. However, this does not mean that you should blindly apply for a credit card. Remember, APR rate is the basis on which you should decide which credit card to go for.
4. Understand How the Finance Charge is Calculated
Many credit card issuing financial institutions use the weighted average method in order to compute the finance cost. In this method, the closing balance of all days is added up and divided by the total number of days. However, there are some financial institutions that use other complex methods to calculate the finance cost. Stay away from the credit cards of such financial institutions.
5. Transaction Fees and Late Payment Fees
Every transaction that you make, the credit card issuing financial institution also make some money out of it in the form of transaction fees. Before you apply for a credit card, you must compare the transaction fees of all the credit cards. If you intend to make regular transactions, then it would be wise to choose the one that charges low transaction fees. The other thing that we would like to point out to our readers is that all the credit card issuing banks charge some penalty i.e. impose a fine on you if you do not pay your credit card’s bill on time. Take this very seriously because if the financial penalty levied is high, then you’d find yourself in hot waters.
6. Find Out Your Credit Score
When you request a financial institution to extend you a credit card, it asks you about some personal information. This personal information is then used to determine the creditworthiness of an individual. The higher the ability to repay, the higher is the credit score and vice versa. If an individual has a high credit score then the credit limit of the credit card will be high and the interest rate charged will be low. On the other hand, if your credit score is low, some of the most reputable banks will not even issue you their credit card.
7. Customer Service
This is the most neglected factor when choosing a credit card. There will be instances when you are not satisfied by the rate charged on your transaction or you’ve found an error in the calculation and want it resolved quickly. In such a case, customer service representatives will be your go-to people, and if the customer service department is not efficient in solving the customer queries, then you would ultimately have a bad experience. So, in short, ask your friends and family members which financial institution according to their opinion has a superb customer service.
According to the statistics published by the UK Cards Association, around 383 transactions in the UK are made every second using credit cards and debit cards. This shows their popularity. But, before you apply for a credit card, you must conduct a comparative analysis so that you can choose the best deal available in the market. We at QuiddiCompare provide our users with the facility to compare all the well-known, reputed and trustworthy credit card providers and their APR rates. Visit our website today to find out the credit card that best fits your requirements.