Today most of us carry a number of cashcards, store cards and credit cards, building up our portfolio of options for how to pay for items. These are all relatively recent additions to our personal finances.
However, ask a member of the older generation and they will tell you how they had to go the bank to physically withdraw cash, while credit was generally frowned upon and often managed by unscrupulous agents. Thankfully things have moved on and a credit card is part and parcel of everyday life for most of us.
Making your application
When you take out a credit card you are asked to complete an application, which will generate your credit history. This tells the supplier how well or how badly you have handled debts and credit in the past. If you have a history of missing and defaulting on payments, the chances are your credit score will reflect this.
If you have not taken out much credit, or have not used your existing credit cards very often, this will also have an adverse effect on your credit history. Most credit companies are looking for people who can prove they make steady and regular payments on their balances.
Once your application is approved you will be offered a credit limit and given an APR, which is the interest rate you will pay on your balance. This varies from place to place, so it is worth visiting a comparison site to see what is around and what is best for you.
A new way of spending
Credit cards today are about much more than just giving you a line of credit and asking you to make a monthly payment. There are a range of benefits attached to most cards, such as cashback, airmiles, loyalty points and discounts and offers. Companies such as American Express India give you access to a whole host of exclusive opportunities, from club membership to hotel stays, using your points.
A good way to approach your credit card is to ask yourself ‘what can it do for me?’ Instead of using it as an emergency line of credit, use it frequently, put all your purchases on it and load it up. If that sounds irresponsible, here is the cast-iron, vitally important bit. You must then pay your balance off in full every month. Never be tempted to only clear a bit, stick rigidly to this rule and you will find yourself actually earning money and rewards through your credit card, simply by making the same everyday purchases you would normally pay on debit card.
Smart use of a credit card is a great way to change the way you spend, without costing you an extra penny.