Credit cards are a great alternative to paying cash for items that allow you to cash in on a number of rewards. They even float your funds if your checking account is running a little low. Understanding the common FAQs about credit cards that we’re going to go over below will allow you to leverage them appropriately when purchasing items.
How is a Credit Card Different From a Debit Card?
Both credit and debit card logos from Mastercard, Visa, and Discover make them seem very similar. However, they operate very differently. A debit card will automatically pull funds from your checking account to pay for your purchase. On the other hand, a credit card borrows funds from the credit card company to pay for your purchases. With a credit card, you’re given a maximum credit limit, and you’ll need to repay the money you borrow plus interest.
How Do I Get a Credit Card?
You can get a credit card by filling out an online application. Credit card providers usually require you to give them basic information, including your name, address, social security number, and so forth. This allows them to verify your information, check your credit history, and determine if they’re willing to extend you a credit card. Ensure you opt for the best one like a SoFi credit card
What is an APR?
When a credit card provider offers you a credit card, they will provide you with a list of terms and conditions. One of the most important figures on that list is your APR. This refers to the annual percentage rate that will be utilized to calculate the interest due on the money that you borrow.
When Must I Repay My Credit Card Balance?
Whenever you utilize your credit card to make a purchase, that amount is withdrawn from the available funds (credit limit) that your credit card company assigned you. At the end of each billing term of typically 28 to 30 days, you’ll receive a statement of your total balance owed. You can opt for repaying the entire balance by the payment due date to avoid any interest charges. Or, you can opt for paying the minimum payment amount on your statement by the due date. It’s vital to note that interest fees will accumulate on the entire balance that you owe if it’s not paid before the statement due date.
Will Missing a Payment Affect My Credit?
A credit card is typically reported to the credit bureaus by the credit card company. Each month, they will report if you’re paying on time or late. If you pay late, it can negatively affect your credit score. According to the experts at SoFi, “To avoid missing payments or making them late, consider signing up for an automatic payment plan with the credit card company.”
Credit cards can be very beneficial when used responsibly. It’s best to comprehend how they work before applying for one so that you don’t make any common mistakes that can damage your credit and your wallet.
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