4 Facts Every First Time Credit Card Owner Should Know
One of the most common forms of consumer financing today are credit cards. Credit cards are a convenient way to purchase products and services and can provide a user with a number of benefits. For those that are new to using credit cards, there are four facts that should be known before opening up and using a credit card account.
Rewards Can be Significant
While most opinions on credit cards advise caution and recommend limiting use, there are clear advantages that come with having a credit card. One of the main benefits is being able to take advantage of rewards plans that are available. To attract customers, credit card providers offer a range of reward programs. These can include cash back rewards, travel rewards, or statement credits. Prior to choosing a rewards credit card, it is important to consider all of the options and pick the card that will provide you with the most value based on your spending patterns.
They Can Impact Your Credit Score
The first thing that new users of credit cards need to understand is that they can, and will, impact your credit score. Credit cards can impact your credit score a number of different ways. Over time, if you keep your balance low and make payments on time, you will actually see a rise in your credit score. However, if you are late on a payment, or do not keep your balance low, it will impact your credit score negatively. Furthermore, the damage can take a long time for you to repair.
There Are Costs
Most people that get new credit cards are attracted by either low rates, free rollover ability, or even substantial rewards and benefits. However, while there can be some great intro deals to get you to open an account, there are recurring costs that you will incur for having a credit card. Most rewards credit cards come with an annual fee, which can be anywhere from $100 to $500 per year. Furthermore, if you build up a balance and don’t pay it off at the end of the month, you will be charged significant interest charges of 20% or more.
Fraud is a Constant Risk
For those that have credit cards, it is also important to understand that you also have to always be on the outlook for fraud. Major retailers are constantly reporting data hacks in which consumer credit card records have been stolen. Because of this, there is always the risk that fraudulent purchases could be made on your account. Due to the risk, it is important that you carefully monitor your credit card statements to ensure that you have not been charged with any purchases that you did not make.