Having a credit card is not as simple as it sounds. For most people, a credit card represents financial power; you can make purchases and charge expenses without having cash on hand. Unfortunately, this has also led to a warped sense of purchasing power, leading to irresponsible credit card usage and management.
According to a recent study published in the journal Economic Inquiry, young Americans in their 20s and 30s now owe more debt than their parents and grandparents did at the same age. On average, these credit card owners owed $8,156 more than their grandparents ever did. The study also noted that their spending patterns show the possibility of dying without ever fully paying off their credit card debt.
One of the factors that could have led to the increase in debt is the fact that credit is now much easier to obtain. Another reason is that most of these young credit card holders do not even realize the responsibility they’re getting into when swiping that shiny piece of plastic in lieu of cash. Be prepared before you submit that application and understand the basic types, terms, and rules of credit cards.
Here are six questions to ask yourself before signing up for a credit card:
Do I need a credit card?
This is the first question to ask before taking the plunge. Not everyone needs it for everyday expenses, but you can use a credit card for emergencies. It’s also a lot safer than using a debit card, which is linked to your bank account and could spell disaster should a criminal get a hold of it. Credit cards are also useful for online purchases and travel expenses.
If your currently lifestyle does not require the use of credit cards, though, then this question should help you avoid embarking on the application process for something you don’t need or want.
Do I have enough income to pay off the monthly credit card balance?
Perhaps the single biggest problem for most credit card owners is the mistaken notion that the credit card offers “free” money. Ask yourself this question before getting a credit card to ensure that you won’t drive yourself into debt. If you’re not sure you can pay off your monthly bill on time, hold off on your credit card application for the time being.
What fees will be involved if I get this credit card?
The annual fee is the most common charge for credit card users. It’s a good idea to ask ahead of time, because the cost of the annual fee could be a make or break deciding factor. Some credit cards charge higher annual fees, while others offer special “waived fees” promos. Be wary of hidden charges like ATM fees.
What rewards does this credit card offer?
Most credit card companies have rewards programs for their credit cards. In choosing the right credit card, pick the one that offers the best rewards system for your personal use. For example, you might want to get a credit card that helps you accumulate airline miles. The right rewards program can be very useful for a credit card owner.
What is your policy on credit card fraud?
Identity theft is one of the worst problems today. Asking this question is crucial if you are to ensure protection in case you are victimized. Different credit card companies have different policies and you ought to find the one that will offer substantial user protection should credit card fraud occur.
Can I get a better credit card?
The good thing here is that there are a lot of credit card options out there. Consumers can easily find one that is useful and suits their needs, rather than one that sinks them in debt. Remember to shop around and see if you have better options before making a final decision. What questions do you have about opening a credit card?