Opening a bank account can be a little intimidating at first, especially considering that many aspects of our finances will be decided by the way we handle it. The more we focus on building a credit score, for example, the easier it will be for us to opt for a loan, or a credit card.
On the other hand, it can be challenging at times to properly handle these two things, especially credit cards since they are a lot more accessible and less time-consuming to use. If a credit card is not handled properly, there’s a chance someone might end up dealing with a huge debt, which can completely ruin someone’s life, or greatly affect their progress in life and its many fields.
Even then, there are people who are attracted to the idea of owning a credit card, and there are many reasons for this, not only including the possibility of building your credit score a lot faster, but also having access to all the benefits of owning a credit card.
Thus, if you are someone who wants to own a credit card, you might want to check this article out, mainly because we will teach some of the basics of learning how to use a credit card, and showcase what are some of the over alle kredittkort principles to keep in mind, and when you should completely avoid them.
With that said, let’s begin with the first thing to understand: What are credit cards?
The Basics of Credit Cards and Loans
The concept of credits is very simple. Simply put, it is a loan that a bank provides to its customers for the sake of purchasing something, be it a product or a service. Credit cards are then, in a way, a portable access to said credits, thus it grants its users the chance to receive money from the bank whenever it is needed.
There are many advantages to these cards besides this. For instance, these credits can also be used to pay for services and products outside of your country of origin, which is very important for a lot of people, especially the ones that are constantly visiting other countries.
It is also possible to cash up money as well, since the bank itself does the conversion for you. At times, this conversion might involve a certain fee, and it is up to you to research this aspect of credit cards.
This specific card also enables you to purchase online products as well, and it is possible to even pay for services. Good examples of these premium services include Spotify, YouTube Premium, Amazon Prime, and other similar services that are now enjoyed by thousands of people all across the globe.
You Decide How to Pay the Loan
These credits, or loans, need to be repaid to the bank, and you decide how much time you will take to do so. These payments often involve monthly fees, and the more fees you decide to go for, the more money you will eventually pay up, but at the same time, it provides a certain level of financial relief that would be otherwise impossible to achieve.
This is the main reason why these credits are viable for a lot of people: It enables them to purchase things that could potentially put them in a rough spot, and also enables them to purchase limited products or products/services that are under a discount.
Cards Do Have Limits, Though
Having a credit card doesn’t mean that you will have unlimited access to money. Before banks provide you with this type of advantage, they usually run a study on whether you are actually a viable person to own it or not, and this is only possible through checking your credit score.
This score pretty much provides them with all the information needed to decide whether you are responsible enough to hold such a tool or not. And through this score, it is also possible to decide what type of card you will get.
Different cards have different budget limits, and this decides how much money you are able to spend through them. The bigger the budget, the more you are allowed to spend, but this often involves a higher interest rate, thus, choosing what type of card is more suited for you is an important part of the process, as shown over at https://www.wikihow.com/Be-Responsible-with-Your-First-Credit-Card.
Starter cards, for example, are the usual cards provided for first time credit card users, since they have a lower interest rate but a fairly limited budget to spend, and this card is the one that allows the bank to study you more as a potential customer for better credit cards, and larger loans such as mortgages.
Have a Solid Idea of What You Want the Card For
As mentioned earlier, choosing a card that suits you the most is essential for an enjoyable experience. To do this, it is important to consider what you usually spend money on, to enjoy all the benefits provided by the bank.
For example, there are credit cards and financial organizations that provide mileage and points every time you use the card for traveling-related transactions. The more you use it, the more mileage and points you get, and these can be exchanged for even more traveling-related transactions. Good examples of the benefits you can get include discounts, plane tickets, and special customer plans for family or business trips.
Even then, regardless of the credits that are more suitable for you, the most important aspect of the whole experience is learning how to use it efficiently, without risking yourself falling into debt.
The Core Concepts of Using Credits
The first thing you have to do, even before opting for a loan or credits at all, is of course, having a solid idea of what your monthly budget is. This will pretty much decide the amount of money you will be able to relocate for your expenses on a monthly basis, thus, making it easy for you to decide the number of months you can go for when paying for something, or receiving any loan.
Without a budget, things become significantly harder to predict, and the chances of going into debt become much more palpable. It is also harder to decide what things you can spend your credits on, since you won’t know how much money you can actually spend.
Another thing to add to the formula is knowing when and why to use your cards. Ideally, you should only use them for necessary things. Emergencies, products you need, courses, and things that can improve your overall life, are good examples of this.
On the other hand, try to never use them on a whim or impulsively, since it makes it harder for you to track your expenses, and you will pretty much pay the bank with interest in the end, making it a not so worth it transaction in the end.
Some people use credit cards to set up automatic bill payments as well, since it greatly simplifies the process of paying bills, and if you pay attention to the monthly payments of the bank, you won’t have to pay interest at all.
When to Avoid Credit Cards
Now, something to keep in mind is that there might be occasions in which someone might not be suitable to own these cards. This is fairly normal considering that not everyone in the world is enjoying enough financial stability to properly handle them.
Some good examples of factors to consider when it comes to avoiding them, include:
- Feeling unprepared for the experience, either for financial reasons, or a lack of self-control when it comes to spending money.
- Not being capable of relocating some of your income to pay for the monthly fees
- You are already dealing with a considerable amount of debts hindering your day to day life
- You suffer from a health condition that can get worse, and you usually spend your money dealing with it
- You believe you don’t actually need to own a credit card, and you don’t have plans on getting a loan or mortgage from a bank
- You prefer to save money to fulfill your goals instead of relying on lent money
- You would rather not pay interests on a monthly basis whenever you purchase something