Although you don't need a credit card, you'll find that most people choose to use at least one. Not only does it provide you with access to money in case of an emergency, but it can also help you establish credit, make online purchases and gain rewards (like cash and airline miles). To better understand the power and the risk they present, let's explore some FAQs about credit cards.
How does a credit card work?
One of the biggest misconceptions surrounding credit cards is that they offer "free money." In actuality, a credit card is like a loan. You borrow money, and then you pay it back. If you pay it back before the due date, you won't pay any additional charges or fees. If you pay it back over a period of months or even years, it will accrue interest, and you will have to pay the interest charges as well.
How do interest charges work?
Certain transactions come with interest. First, if you don't pay your full balance or you pay after the due date (and your provider doesn't offer a grace period), you will have to pay interest on the purchases you have made. In addition, any cash advances or balance transfers will begin charging interest immediately. Do your best to avoid interest charges, so that they don't escalate and bury you in debt.
What is the difference between a credit card and a debit card?
A credit card is like a loan. You borrow money, and then you pay it back. A debit card, on the other hand, is connected to your checking or savings account. When you make a purchase, the money comes directly from your account balance.
How can I avoid fees and interest charges?
As long as you are responsible and organized, you shouldn't have any trouble avoiding fees and interest charges on your credit card. Simply find a card that lacks an annual fee, like a BluCurrent credit card
, pay your balance in full and on time each month, avoid foreign purchases, and don't consent to over-limit fees. When you get a credit card, it is important that you look over the terms and conditions of your agreement and understand where you might incur a fee.
How much money can I spend with a credit card?
You will need to check your credit line, which is the amount of credit extended to you by the credit card provider. Experts recommend that you do not use the entirety of your credit line each month, even if you can pay it off, as this could hurt your credit score. If your limit is restrictively low, request a credit line increase.