The above title means understanding credit cards and how to use them. This article is mainly to help Norwegians understand all about owning and using a credit card, plastic money or plastic as they are also called. However, whether you live in Norway or any other part of Europe, the U.S or indeed any part of the world, the information shared here would be useful to you so please read on.
Many Norwegians and in fact people of other nationalities may love the idea of owning and using these plastic money. But it is important to understand all the details before proceeding to get one. Visit https://www.thebalance.com/what-is-a-credit-card-960233, get more information to enlighten you
Before we go further, let’s give you a brief introduction to credit cards…
What Is A Credit Card
It is an electronic means of payment for goods and services. It is issued by a financial institution to an individual who can use it at point of payment, online or other approved instances. The card holder is able to buy something or pay for a service without being debited immediately.
This electronic means of payment comes in handy because you can use it in times of emergency or when you need to make an unbudgeted payment. In countries like Norway, financial institutions give a minimum of forty five days interest free payment period. This makes it easy for a large number of folks to pay temporary debts.
Reasons Why You May Need A Credit Card
Due to the fact that many people are trapped in the web of debts from ‘plastic money’, some folks shy away from getting and using it. Although you may have made up your mind not to get this tool, we would give you some reasons to reconsider your decision.
To Build Credit
Building your credit history is a lot harder if you don’t have a credit card. Consequently, an insufficient credit history makes it difficult for you to get loans; it can even get you a rejection when you go to rent a house or a higher insurance on your car.
Plastics are deemed the best method for payment due to the security measures in place. If for instance someone gets hold of your card and makes a fraudulent transaction, you can get in touch with the issuing institution to remove the charges and get a new one.
The highest amount according to law that you can be asked to pay back in case of fraud is $50. There are even financial institutions who charge their customers nothing. This therefore means that the card holder is not liable in the event of a credit card fraud committed against them.
With this means, you can get value back when you spend money. This comes in form of travel points, cash back or other kinds of rewards.
What To Look Out For In Your First Credit Card
The first of this ‘plastic money’ that is gotten by a user is known as a beginner credit card. These come with some perks and features so you should look out for financial institutions that offer them to their first timers. They include the following:
No Annual Fee
Financial institutions always want you to keep the first card you get from them open for life. Financial advisors also recommend this because it helps you to enhance the longevity of your credit history. So it is best that your first card is one that comes with no annual fees. That way you wouldn’t have to pay annually just to leave it open.
Low Security Deposit Or None At All
A secured card is in the category of cards that need collateral before an account can be opened. So if you get a secured card, the deposit amount should be at the barest minimum. The ideal beginners’ card should have at least a $200 limit for $200 deposit or even less. It would not be economically viable to spend too much money to open a card account.
Although rewards are not the most important features to look out for, they are perks that can make the card more beneficial. So if you can get rewards on your beginner card, it would a very great advantage.
Free FICO® Score Tracker
There are some issuers that give their customers access to their FICO® Score without additional payment. With this score, you can keep tabs on the score from your online account.
Finally, before you make up your mind on which issuer you want to deal with, you might need to carry out a test av kredittkort (credit card test) to ensure that the choice you are making is the best for you.
How to Be Responsible With Your Credit Card
Like we hinted at in the beginning of this article, many people have been enmeshed in debt because of irresponsible use of credit cards. But if you use these cards responsibly, you can get a whole lot of rewards and benefits. Additionally, you can enhance your credit history/score.
The following are ways you can use your plastic responsibly:-
Charge Only What You Can Afford
Charging for what one cannot afford is one sure way of sinking into the abyss of debts. A lot of people use their credit card without a consciousness that they are the ones picking up the bills at the end of the day. Treat the card as if you are paying cash; that way you would be conscious of your spending.
Always Maintain a Balance That’s Below Your Limit
Using your credit card to a ratio of 30 percent or even lower can help enhance your credit score. But when you pass the 30% utilization ratio, your score goes down. Let’s look at this example; you have a number of plastics and they all have a total limit of Ten Thousand (€10,000). Always ensure that your charges are never more than Three Thousand (€3,000) at any particular time. That way, you credit score would remain high which means a good credit history.
Pay In Full All The Time
Ensure that you pay the full balance on your statement always. This is because once you start carrying a balance; you automatically begin to accumulate interest charges. Bear in mind that the interest would compound on a daily basis until your debt is paid off.
Always Review Your Account Statement
The importance of reviewing your statement regularly is so that you can catch any fraudulent transaction and report it to the issuing company. Even if it is a small charge, as far as you don’t know what it is for, report it because it can be a fraudulent transaction.
Thieves and fraudsters always buy seemingly insignificant things so as to test the numbers of the cards that they stole. Once those small transactions go through, they move in for the kill. So always ensure that every transaction on your statement is legitimate.
Lookout For Benefits and Rewards
Not only does your plastic work as a kind of interest free short term loan, it also accrues rewards for use. A high percentage of issuers give their card holders extra benefits such as insurance for stolen stuff and also in-built protection for purchases.
Not only that, you have access to a number of rewards offered by the issuer so ensure that you are always on the lookout for them. That is why you should check out how useful and accessible these rewards would be to you.
Do Not Let Your Account Become Dormant
It is bad for your credit score if you leave your account inactive for a long time. Banks have a policy of closing an account that’s not been in use for 6 months and above. You can keep your plastic open by using it to make small purchases from time to time.
With these transactions, your card would always be reported to all the credit bureaus. Note that keeping it open is important because the average age of the account enhances your score.
Request For An Increase In Credit Limit
After you have used the card for about 9 months and above, and you have been charging it up and paying off your balance fully, you should probably ask your issuing company for an increase. It would be easier to stay within the limit of 20 to 30 percent ratio with a higher credit limit.
We have discussed a number of things about credit cards and we know that the information shared in this article is quite educative. If you are thinking of getting a credit card, then you need to go through these tips again; they would really come in handy.