What Are Credit Card Basics?
Credit cards can be quite daunting, especially from what we’ve heard online; however, once you learn about credit card basics, you’ll be able to responsibly and effectively manage them!
This post is about credit card basics.
Let’s dive into the top 5 credit card basics:
1. Billing Cycle
This is the range of time in which credit card transactions are recorded. The billing cycle usually spans about 1 month.
2. Types of Credit Cards
There are a plethora of different credit cards. There are ones that are starter/standard, student, cash back, points, miles, and more.
The starter/standard ones are no frill cards that don’t offer any special features. These can often be similar to student cards.
Student credit cards are usually introductory cards catered towards college students. These typically offer lower credit limits and no/low annual fees.
Cash back credit cards provide a certain % of cash back based on each transaction. This percentage varies based on the card and category of purchase.
Miles/points credit cards are frequently tied to airlines where you can earn miles/points based on each dollar you spend on the card. These cards typically offer generous sign-up bonuses, travel perks, potentially cover flights, hotel stays, and other travel related expenses.
3. Credit Utilization Ratio
This is equal to the total credit card balances (across all active/open ones) divided by your total credit limits. It is suggested to keep the ratio below 30% to keep a good credit score.
4. Credit Limit Increases
This is a variable that’s factored into your credit utilization ratio, and if you’re spending responsibly but keep going over 30% for your credit utilization, you could potentially look into requesting an increase on your credit limit. Different issuers have different methods of going about this request. It is best to come up with several reasons as to why you deserve a credit limit increase, because the issuer will ask you why.
5. Security Features
One of the biggest pros of credit cards is the security features it offers. Since it’s not directly linked to a bank account, that’s automatically an added layer of security. Additionally, there is usually some element of fraud protection where, if your information was stolen and used to make unauthorized purchases, you can report it as fraud and potentially get your money back.
To reiterate, the top 5 credit card basics are:
- Billing Cycle
- Types of Credit Cards
- Credit Utilization Ratio
- Credit Limit Increases
- Security Features
There you have it! Interested in learning more credit card basics? Check this post out for everything you need to know about credit cards.
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