How to Use a Credit Card (Kredittkort)?
Have you considered applying for a credit card? This financial step provides individuals with both flexibility and responsibility to stay out of debt. Having such an account is helpful when faced with unexpected costs, which your salary isn’t high enough to cover.
In contrast, irrational spending results in a mountain of debt and a bad FICO score. Not using your credit card responsibly minimizes your chances of getting a mortgage or another type of loan in the future.
Follow the handy tips below in order to be a responsible cardholder.
Get a card
In order to use a credit card, you need to obtain one first. Banks and credit unions are more than willing to provide such a payment option to their loyal clients. Make sure to visit the financial institution where you already have a savings account and discuss the possibility of getting such a card with one of the clerks.
The eligibility of clients is largely determined by their financial history, which is why many people fail to meet the requirements of financial institutions. Young adults are considered the least eligible because of their insufficient financial history. Also, people with bad scores aren’t exactly the first choice of banks when offering this type of payment alternative. The following link, https://en.wikipedia.org/wiki/Credit_card, explains the history, usage, features, types, and benefits of credit cards.
Moreover, banks aren’t the only providers of credit cards, as you can obtain one from a credit card company or a local business. Companies like Mastercard offer an extensive range of cards to clients as long as they meet their criteria. Similar to banks, these companies don’t consider financially irresponsible people eligible.
A large number of local businesses from various industries offer this sort of payment option to customers. These cards aren’t exactly favorable because of the high-interest rates. Nevertheless, many people find them appealing due to the rewards they provide. For instance, local businesses offer no-interest periods and various bonuses. Most airlines enable clients to collect miles the longer they use their accounts in order to get ticket discounts once they accumulate a certain number of points.
Prove to be financially responsible
The first thing issuers check when considering the applications of candidates is their credit history. After getting reports from reputable agencies, financial institutions pay attention to several important factors. Firstly, they analyze the loan history of applicants by checking whether they have paid off their past loans on time. In case you’re paying off a mortgage, banks will do their best to find out if your payments are timely.
The same goes for your rent payments. Financial institutions are interested in the rent payment history of candidates in order to check whether they pay their rent every month. Additionally, banks gain insight into the past credit cards of applicants so as to assess the financial responsibility of candidates. They will also be interested in learning about potential foreclosures and bankruptcies.
Use it responsibly
Once you’ve obtained a credit card, it’s time to start making purchases. Nevertheless, one is supposed to be cautious in order not to end up in a mountain of debt. The job of debt collectors is to collect debts (samle gjeld) in case individuals fail to pay the amount they owe. Hence, cardholders are strongly advised to be responsible from the very beginning of using this payment option.
Moreover, cardholders can make payments until the costs reach the credit limit. The limit of secured cards is in fact the deposited amount, so purchases exceeding the sum will be declined. The more purchases you make, the more balance is accumulated. At the end of the month, you’ll receive a bill that corresponds to the balance you’ve racked up. Although you won’t be required to pay the entire sum, you’ll still have to pay at least two percent of the amount. By failing to pay the lowest amount required, you’ll be forced to face penalties.
Cardholders stand to benefit the most from paying their balance off in the shortest possible notice. The unpaid sum transfers to the following month with added interest. The interest is actually a form of a fee, which issuers apply to penalize cardholders for not settling the entire balance.
Another way of using your credit card responsibly is by making small purchases on a regular basis. Also, it’s crucial for you to settle these payments as soon as possible. Consequently, financial institutions will think of you as a responsible client and improve your credit score. Bear in mind that your FICO score plays a decisive role in financial transactions, such as getting a mortgage or a personal loan.
In addition, cardholders are expected to be careful when using their available credit. The largest part of individuals is tempted to use as much of it as possible, which is detrimental to their FICO scores. The last thing you want is for financial institutions to consider you irresponsible because of relying on this account more than necessary.
Having multiple credit cards isn’t the wisest of decisions, as it once again affects your cardholder’s reputation negatively. Make sure not to get more than five in order to be able to manage them successfully.
Protect your cardholder information
Unlike debit cards, these payment options come with no PIN. Generally, cardholders are required to provide a signature or an ID when using their accounts. Nevertheless, you’ll be provided with a password in order to access your online account. Make sure never to disclose such information, as you’ll end up paying huge bills without spending a cent.
In the event of a theft, waste no time reporting the event to the issuer. The faster you react, the higher the chances of issuers freezing your account. Consequently, the person who stole it won’t be able to make any purchases.
Never rely on your credit card too much.
Make sure to use it rationally so as to build a good score and take advantage of future financial transactions!