Credit Basics

It is essential to know what questions you need to ask when applying for a credit card. You need to be well aware of the credit card use and the purpose of owning a plastic. You also need to take into consideration APR, fees, whether you are going to pay your balance in full every month or to make payments in parts. If you pay your balance in full, you don't have to worry about enormous fees except for APR. If you are going to extend your balance every month, you need to figure out whether you will have the extra funds to pay the finance fees and APR.

If you intend to use the cash advance service, you need to determine whether you can pay back the debts and additional fees incurred. It is vital to ask and answer yourself these questions as credit cards demand a great deal of responsibility.

You should ask the credit card issuers what does your low APR entail. Lots of plastics apply the APR on late payments, purchases, cash advance, and balance transfers. So, if you are searching for a card, make sure that you are aware of all the details of your interest rates.

Interest. Interest is very important, as the rates may change dramatically. Some credit card companies offer Tier rates, Variable Rates, and Fixed Rates. The fixed rate cards are more preferable for you in most cases.

Grace Periods. It is VERY important to understand grace period feature on credit cards. The grace period is essential, since if you go over the cycle you are subject to penalties, finance fees, and default interest rates. So, we recommend you to ask the bank if the balance on grace periods has penalties, and if so, what those charges are. Ask the credit card issuer, if the balance is paid in full, will you receive benefits. Also, ask the lender if the credit cards have penalties on cash advances.

Finance Fees. You must also have knowledge about the finance fees. Usually credit cards have additional fees, including fees for advances, late payments, balance transfers and other. You should figure out, do they estimate your fees by a 'one or two' cycle, whether the fees are adjusted or standard, the minimal financial charge per item, will the estimated amount exclude new purchases made on the card. This is an approximate checklist that you should keep in mind.

Charges. Find out if the credit card has additional fees, including annual fees, late charges, setup fees, and credit limit overdraft fees.

Cash. Find out if there are fees for cash advance.

Credit Limits. All credit cards have credit limits. Always make sure you know your limit and watch your statements carefully to avoid additional fees.

Offerings. Some cards offer cash back rewards, points, air miles rewards, and so forth, providing credit cards holders the opportunity to earn some of their money back. The programs may offer free hotel stays, flights, merchandise, etc. Be sure you ask all details on the rewards.

Insurance. Do you have fraud insurance coverage on your credit card? If so, how much will be refunded and how much will you have to pay if your card is stolen or lost?