Have you just received your first credit card? 8 key things to consider

Are you thinking about applying for a new job? credit card In a bank? It is certainly a good idea, but it is worth finding out about its advantages and disadvantages and, above all, its main characteristics.

Here is an overview of using a credit card and its key features that may change the way you use your credit card.

First, keep in mind that a credit card does not give you access to free money. The only thing you can get is a interest-free period 45 to 55 days, depending on when the credit card bill is generated.

Secondly, any delay in paying your credit card bill can cost you dearly.

So before you start believing that a credit card is a great financial tool that can change the way you shop and travel, you may be fantasizing too much about its virtues.

These are the key features of the credit card:

1. High interest ratesCredit cards charge a high interest rate on their installments, so it is highly recommended to pay off your credit card bill as soon as possible. If there are any outstanding bills, you may end up paying high interest, in the range of 2-3 percent per month, i.e. 24-36 percent per year.

2. Credit Utilization Rate (CUR): This ratio calculates the proportion of your total available credit that you have used so far. To maintain a good credit score, your credit utilization ratio should be less than 30 percent.

This means that if your credit limit is ₹10 lakh then it is recommended not to use more than ₹3 lakh. Sounds a bit weird but true.

Some credit card users, for this reason, sign up for multiple credit cards so as not to use more than 30 percent of the CUR on any one of them.

3. Multiple credit cards:Even if you plan to keep your credit utilization rate below 30 percent, it is recommended to only have a small number of credit cards. Using one card to pay another’s bill can work sometimes, but it shouldn’t become routine.

4. Reward points:Whenever you use your credit card to buy something or to make payment for the services you purchased, you have the right to receive the reward pointsThese reward points continue to accumulate and can be redeemed later for coupons.

This is considered one of the key incentives for using a credit card.

5. Jumbo loan: Credit cards also allow users to access pre-approved jumbo loans. This means that if you want to get a personal loan, you can use your credit card to get it without having to submit any documents.

6. Smart EMI:When making an expensive purchase, you can spread out the credit card payments in monthly installments. However, it is essential to keep in mind that the credit card must have the smart monthly installment feature.

7. Cash Withdrawals:One of the biggest mistakes you can make is using a credit card to withdraw cash. The interest charged for cash withdrawals is usually very high and is best avoided, to say the least.

8. Annual fees:Credit cards usually have a Annual fee In some cases, this credit may be waived during the first year. So, if you think that using the “credit” is free, you are deeply mistaken.

Remember, there are no free lunches in this world!